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The Importance of a "Non-Compete" when Buying a Business

Since the seller's individual shareholders/owners know the business better than anyone else and will possess relationships with customers and suppliers that you will depend on, it is critical that your purchase agreement and closing documents include "non-competition covenants" prohibiting the seller (including, the seller's individual shareholders) from establishing, managing or operating a business that will compete with you in the future. An acceptable non-competition covenant must precisely, clearly and fairly define a specified duration (during which the seller and the seller's shareholders are prohibited from competing) and territory (in the form of a set radius of "miles" from the location of the business that you are purchasing) prohibiting the seller and the seller's individual shareholders from competing with you or diverting your customers to a third party.

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