Business from The Internet

In most shops, it is standard to include a non-compete clause. The logic is simple. The current owner of the company decides they want to sell and the buyer wants to buy the company. As a condition for the purchase of the company, sees the buyer that the seller can not open the same type of business that the seller is currently operating as a target existing clients buyer who want to do business with the seller, rather than transferring their loyalty to the purchaser.

Used when used as part of a change of ownership in a transaction between a buyer and a seller, the seller agrees not to engage in the same industry or a similar business in a particular area for a period of time. These two elements are part of the negotiations. Generally, the buyer wants the geographical area as wide as possible while the seller is as low as possible. In addition, the buyer wants the period to be as long as possible, while the seller wants as short as possible. Of course, if the seller is retired and will no longer work in a company, time and geographical space may be of minor importance and are willing to accept what the buyer wants.

What happens if the company has gained an online presence and receives business from the Internet? This can be difficult for sellers that buyers can rightly claim that they are not buying the company if the seller has no job or business in the same or similar industry, the Internet or an online presence are involved stakeholders.

How do you decide which party or the allocation of the purchase price must not be made to the federal government to compete? In the U.S. the IRS has a dual strategy. First, the amount must be based on economic realities and pause a second, it must have independent economic significance. In other words, the value assigned to the covenant not to compete to be realistic when taking into account the full purchase price, and it must be shown that the restriction of earning capacity of the seller, income future operation of the same type of signal for companies to be real.

Some of the factors used to evaluate a covenant not to compete are:
• The seller will strengthen the competitiveness and the seller intends to compete
• Seller economic resources
• The potential loss to the buyer by the seller to provide a competitive
• The provider of expertise and industry contacts and relationships with major groups, as with customers and suppliers
• The buyer of interest in the elimination of competition
• The duration and spatial extent of the Covenant not to compete, and finally
• The seller intends to stay in the same geographical area.

A pact not to compete is a normal part of a commercial transaction under negotiation. It can lead to tensions in the negotiations, especially if both parties want different results. In other words, if the seller wants the geographical area within 3 miles of the current situation of the company and the buyer wants 25 miles is a big difference. It is not uncommon for the buyer to try to ensure that the reason they give or sell the business, are games for their actions. For example, if the seller says they intend to retire after they want to sell or move interstate cases sold by the company and then says she wants to compete, not the federal government to a small geographic area for a short time, then it may be a red flag.

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Sunday, August 14th, 2011 Business Online

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