What to Know About a Non-Compete When Selling a Business in Florida

Every buyer I have brought to a closing table in the last thirty-three years has asked for the same thing. A few pages past the purchase price, there is a paragraph saying you will not own, operate, or work for a competing business for a set number of years inside a set territory. Most sellers read it once, nod, and move on to the number they care about.

I understand the instinct. Still, signing a non-compete when selling a business in Florida deserves real attention before you agree to it. Florida enforces these covenants more consistently than most states, the terms will follow you for years after the wire hits your account, and the way the covenant is written into the deal can even change how much of your price you keep after taxes.

Why Every Buyer Insists on One

When someone buys your company, a large share of what they pay for is goodwill. Your customer relationships, your reputation in the market, the referral partners who call you first. All of that walks out the door with you unless something keeps it in place. If you could open a competing shop down Dale Mabry the month after closing, the buyer would have paid for something you could take right back.

So expect to sign one. Your leverage lies in what it covers.

The Rules for a Non-Compete When Selling a Business in Florida

Florida Statutes Section 542.335 governs restrictive covenants in this state. To be enforceable, the covenant has to be in writing, signed by you, tied to a legitimate business interest, and reasonable in time, geographic area, and line of business. The goodwill you are selling qualifies as that legitimate interest, which is why sale-of-business covenants tend to hold up well in Florida courts.

The statute also sets presumptions about how long a restriction can run, and it treats business sellers differently from employees. For an employee, six months or less is presumed reasonable and anything over two years is presumed unreasonable. For someone selling all or part of a business, three years or less is presumed reasonable and more than seven years is presumed unreasonable. Anything in between gets weighed on its facts. The law expects a seller who received a purchase price to accept a longer restriction than a departing employee.

One more point catches sellers off guard. When a Florida court finds a covenant broader than it needs to be, the court generally narrows it to something reasonable and enforces that version. An owner who signs an overreaching clause on the assumption that a judge will toss it is usually making a bad bet.

The Three Terms Worth Negotiating

Duration. Most of the sale-of-business covenants I see land somewhere between three and five years. The right length depends on how long it would realistically take the buyer to make your customer relationships their own. A route-based service company may need less time than a professional practice where clients have worked with you personally for twenty years.

Territory. The geography should match where your business actually earns its revenue. If your company serves Hillsborough and Pasco counties, a restriction covering all of Florida asks for more than the buyer is buying. Pull your customer list by zip code before you negotiate this, and bring that map to the table.

Line of business. Define the restricted activity as tightly as possible. If you sell a commercial landscaping company, you should still be free to invest in real estate, sit on a board, or consult for businesses that do not compete with it. Vague language like "any similar business" invites disputes later.

Expect a non-solicitation clause alongside the non-compete as well, covering your former employees and customers. Read it with the same care.

The Tax Side Most Sellers Miss

Somewhere in your deal, the purchase price gets allocated across the assets being sold, and part of it may be assigned to the non-compete itself. That allocation matters. Payments allocated to a non-compete are generally taxed to you as ordinary income, while the portion allocated to goodwill is generally taxed as long-term capital gain at a lower rate.

On the buyer's side, a covenant tied to an acquisition is amortized over fifteen years under Section 197 of the tax code, even when the covenant itself only runs three or five years. In an asset sale, goodwill is amortized over the same fifteen years, so the buyer usually gains little by pushing dollars into the covenant. That gives you room to push back on a heavy allocation. Stock sales work differently, because the buyer cannot amortize stock but can amortize a covenant, so expect more pressure there. Bring your CPA into this conversation before the letter of intent is signed.

Your Key Employees Are Part of the Picture

Buyers also worry about the people who hold your customer relationships. If your top project manager can leave after closing and take accounts with him, that risk shows up in the offer.

Florida's CHOICE Act, which took effect July 1, 2025, gives employers stronger tools here. It allows non-competes of up to four years for covered employees, generally those earning more than twice the annual mean wage of the county where the employer is based, and it requires courts to issue an injunction quickly when a covered agreement is breached. Health care practitioners are excluded. The Act has specific signing requirements, including written notice of the right to consult an attorney, so this is work for your employment counsel. Done well ahead of a sale, it can make your business easier to buy. I wrote more about keeping key people through an ownership change in an earlier guide.

Read the Assignment Clause Twice

Florida has a rule that matters in any deal where the buyer may later resell. A non-compete can only be enforced by a successor or assignee if the agreement expressly allows it. Private equity groups and add-on buyers will almost always want that language included. Agreeing to it is common, but you should know that the company you sold today could be enforcing your covenant under an owner you have never met.

Where I Fit In

I am not an attorney, and every covenant I negotiate on behalf of a client is reviewed by that client's own counsel. What I bring is the business side of the conversation: what a buyer in your industry genuinely needs to protect, what duration and territory are reasonable for your market, and how the covenant fits with the price and structure of the overall deal. A non-compete negotiated alongside the valuation and the terms tends to come out far cleaner than one handed over at the end.

If you are starting to think about an exit, a defensible business valuation is the right first step, and exit strategy planning is where issues like key employee agreements get handled well before a buyer arrives. You can also see how covenants and other terms affect what you actually take home at closing. When you are ready to talk through your situation, reach out and you will be speaking with me directly.

Tom Brubaker is the founder of TAMBAY Mergers & Acquisitions in Tampa, Florida. He is a State-Certified Appraiser (License RD2130), a Licensed Real Estate Instructor (License ZH1003617), a member of the International Business Brokers Association, a Business Brokers of Florida State Board Member, a 2025 BBF Top Dollar Producer, and Number 1 in West Florida.