The seller’s non-compete is judged as a sale, not a job.

A non-compete signed as part of selling a business is reviewed less searchingly than the same words signed by an employee, because the buyer paid for goodwill. Longer terms and wider territories can survive that review. What you actually collect depends on the seller’s state, on which document the covenant sits in, and on how fast you can prove harm.

Why is the seller’s non-compete stronger than an employee non-compete?

A covenant given in connection with the sale of a business is judged under a materially more permissive standard than a covenant given by an employee. The reason is consideration. The buyer paid for goodwill, and a seller who sold that goodwill cannot quietly take it back by competing against the business he sold.

Legislatures wrote that distinction into statute. Georgia rebuttably presumes reasonable a restraint against the seller of a material part of a business lasting the longer of five years or the period of sale payments, measured from disposition of the interest. Florida rebuttably presumes more than two years unreasonable against a former employee, but in a separate subsection presumes three years or less reasonable against a seller, and more than seven unreasonable. California voids non-competes generally, then carves out the seller of the goodwill of a business by name.

When the seller’s lawyer sends a letter about non-competes being unenforceable, he is usually arguing the wrong body of law. Most writing on the subject is about employees, and you are not holding an employee covenant. The FTC’s rule is no answer either; as of September 2026 it had been set aside nationwide.

Law: Georgia Code 13-8-57(d); Florida Statutes 542.335(1)(d)1 and (1)(d)3; California Business and Professions Code 16600, 16601; Ryan LLC v. FTC (N.D. Tex. Aug. 20, 2024).

What does the sale standard actually get you in practice?

The sale standard mostly buys duration and territory. Terms of three to five years, and territories drawn around where the acquired business actually sold, are far more likely to hold in the sale context than the same numbers attached to a rank-and-file employee. It does not buy a covenant untethered from what you bought.

Those are tendencies, not guarantees, and some states cap the outer limit by statute. The tether is where buyers lose. In Kodiak Building Partners, the covenant barred a selling stockholder from competing with every line of business the buyer owned, not just the business acquired from him. The Court of Chancery held it overbroad, declined to blue-pencil it, and left the buyer with nothing. Ask whether your restraint protects the goodwill you bought or your whole enterprise.

Law: Kodiak Building Partners, LLC v. Adams, C.A. No. 2022-0311-MTZ (Del. Ch. Oct. 6, 2022).

Check four things first.

• The start date. Closing, the end of a transition period, or the last seller-note payment.
• The activity. "Competing business" defined by what the acquired company did, or by whatever you do now.
• The territory. Counties and a radius, or a nationwide restraint on a business serving one metro area.
• Who signed. The selling entity only, or the owner, his spouse, and his affiliates.

If only the selling entity signed, and it has dissolved and distributed its cash, you have a covenant against a shell. Dissolution statutes may let you reach distributed proceeds for a limited window, but that is a second lawsuit, not a remedy.

Which covenant controls when the seller also stayed on as an employee?

Two covenants on the same subject usually exist, because the seller is also a post-closing employee or consultant. Neither one automatically wins. Courts look first at what the documents say about which controls, and a later employment agreement with an integration clause can be read as superseding the purchase agreement covenant.

Texas ties the burden of proving reasonableness to whether the primary purpose of the agreement the covenant is ancillary to was personal services. If it was, the burden is yours.

Law: Texas Business and Commerce Code 15.51(b).

I read the covenant in the purchase agreement and the covenant in the employment agreement side by side before I read anything about what the seller actually did.

The failure mode is mechanical. The employment agreement says two years from termination of employment. The purchase agreement says five years from closing. The seller works six months, quits, and argues that the later employment agreement is the parties’ final word, on a clock that has nearly run. If it has an integration clause and does not carve out the purchase agreement covenant, the argument is not frivolous.

Fix it in the documents, not in the litigation. The employment agreement should state that its covenants supplement, and do not amend, limit, or supersede, the purchase agreement covenants, and that termination for any reason does not shorten that term. Three sentences before closing, an ugly fight after.

Will a court fix an overbroad covenant, or throw the whole thing out?

State law splits on overbreadth, and the split decides whether an aggressive covenant is an asset or a nullity. Some states reform the covenant to reasonable limits and enforce it. Some strike only the offending words. Some void it entirely and leave the buyer with no restraint. The seller’s state usually supplies the answer.

Two entries deserve a second look. Louisiana requires the parishes or municipalities to be named, so a covenant reciting "the United States" can fail on its face. California’s exception runs only while the buyer carries on a like business in the named area, and fits best a seller who sold his entire interest. If your seller rolled equity and kept a slice, the text fits worse.

An aggressive covenant is not a stronger covenant. In a state that will not rewrite it, it is a covenant you do not have.

Does the choice-of-law clause in my purchase agreement decide this?

Not by itself. A chosen state’s law usually applies, but a forum can refuse to apply it where doing so would violate a fundamental public policy of the state with the materially greater interest, and restraints on competition are a standard example. Read the governing-law state, the venue state, and the seller’s residence together.

A Delaware choice-of-law clause may not control if the seller lives in California and sues there first. California’s statute reaches contracts signed elsewhere and gives employees a private action against attempts to enforce void covenants, though that action does not run to a seller bound by a covenant fitting the sale exception. Minnesota, which bans employee non-competes but excludes sale-of-business covenants, also restricts foreign choice-of-law and venue terms in employer-employee agreements. Neither destroys a sound sale covenant, but both mean your home forum is not automatic.

Law: California Business and Professions Code 16600.5; Minnesota Statutes 181.988.

Should I sue for an injunction or for money?

An injunction stops the conduct but requires a fast evidentiary showing, usually likelihood of success, irreparable harm, a favorable balance of equities, and a bond. Damages are slower and need proof of loss. The choice is driven by whether the seller is taking your customers or just taking a paycheck.

These elements vary by state and court, and each is discretionary. The irreparable-harm showing is front-loaded work. Before filing, assemble the closing customer list, revenue by customer before and after, dated communications showing which accounts the seller contacted, and the price allocation showing you paid for goodwill. A buyer who waits eight months while revenue bleeds hands the seller the argument that the harm is compensable in dollars.

Then read your remedies clause with cold eyes. Liquidated damages provisions are uncommon in purchase agreements at this size, so most buyers prove actual lost profits rather than collect a stated number. If you have one, it holds only if damages were hard to estimate when you signed and the sum is a reasonable forecast, not a penalty. If it is the sole and exclusive remedy, you may have bargained away the injunction. If remedies are expressly cumulative, you have both.

Understand the reformation trap. In Texas, where a covenant is reformed because its limits were unreasonable, relief is limited to an injunction and damages for earlier breach are barred. Overbroad drafting can convert a damages case into an injunction-only one.

Law: Texas Business and Commerce Code 15.51(a) and (c).

Can I just stop paying the seller note?

Only if your documents say you can. Unpaid seller-note principal is leverage many first-time buyers overlook, because it is one of the few remedies the buyer already controls. Whether it works depends entirely on whether the purchase agreement, the note, and the lender’s standby agreement permit offset.

I ask for the seller note and the standby agreement before I ask what the seller has been doing.

Three things decide it:

• Express setoff language. The note must permit offset of indemnity claims and covenant breaches, and should say a good-faith offset is not a default. Without it, withholding breaches the note and can trigger acceleration and default interest.
• Notice mechanics. Most agreements require written notice of the claim, with detail and a cure window, before anything is withheld. Skipping that is how a good claim becomes a bad one.
• Standby and lender consent. If your lender required the note to be on standby, there may be no current payment to withhold, and your leverage is offset against the balance later. Changing payment terms on a note subordinated to an SBA loan is for your lender and the standby agreement, not a unilateral decision.

Offset does not end the dispute. The seller can sue on the note, and you then prove your covenant claim as a defendant, on his schedule. It changes who holds the money, not what you prove.

On SBA currency: stated as of September 2026. SOP 50 10 8 took effect June 1, 2025 and was later revised by a technical updates version; SBA has since published SOP 50 10 8.1, applicable to loans receiving a loan number on or after October 1, 2026. The requirements in force when your loan number issued govern your file. Read your own standby agreement, not any summary, including this one.

Reference: SBA SOP 50 10 8 (Information Notice 5000-866746); SOP 50 10 8.1 (Policy Notice 5000-880695). Stated as of September 2026; confirm the version in force.

An injunction needs a judge. A lawsuit needs a year. Offset needs a clause you either have or do not have.

What should I do this week if the seller is already competing?

The first week is documentary, not adversarial. The covenant’s enforceability where the seller lives, and the remedy your own documents permit, are both knowable from paper you already have. Answer those two questions before anyone sends a letter, because the letter you send commits you to a theory.

Work in this order:

• Print both covenants, the purchase agreement one and the employment or consulting one. Write down both clocks, their trigger events, and both territories.
• Write down the seller’s residence, the governing-law state, and the venue state. If they differ, that clause is an argument, not an answer.
• Pull the remedies provisions. Look for a liquidated sum, whether it is exclusive, and whether injunctive relief survives.
• Pull the seller note and any standby agreement. Find the setoff clause, the notice requirement, the cure period, and the outstanding principal.
• Start the damages file now. Customers lost, dates, dollars, communications. Preserve emails and texts, including your own.
• Do not cancel the seller’s access, withhold a payment, or accuse him in writing until you know which remedy you want. Self-help in the wrong order creates his counterclaim.

Then decide. If he is quietly servicing two old accounts and the note has principal left, offset with proper notice is often faster. If he opened next door and is calling your customer list, you are in injunction territory. If the covenant is overbroad and his state will not rewrite it, your leverage may be the note and nothing else. Knowing that before you file is worth more than the filing.