Can a business partner hold up your buy-out until you sign a non-compete agreement?

I have a photo booth LLC with 2 business partners and have decided to sell my portion due to disagreements. We have agreed that my payout will be $2600. One of the partners wants me to sign a non-complete and stated if that I don’t he will hold the funds until I do. Since then I have started the process of opening my own photo booth business. It has been 3 weeks since he has not paid me out. Also, since I decided that I want out, he removed my access to the business.

Asked on July 6, 2014 under Business Law, California

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

This question has a lot of complicated components and there are some issues that need to be addressed.  First, did you have a partnership agreement?  If so, then that would govern transactions between you (it should have addressed it).  If not, then your partners can request that the non compete be part of the buy out. That issue is part of the negotiations. If you do not want to agree to it that is your decision. Non competes can not be too broad, meaning that they can not limit you for too long and for too much an area.  Say they want you not to open a booth for 10 years and within 250 miles. But it sounds like you are not going to sign it.  Then if there is no deal on the buy out they can not limit your access to the business.  I think that you will need some legal help here.  Try and see if an attorney can do this for you on a flat rate given the amounts involved.  And make sure that your new business does not violate any agreements between you as well. Good luck. 


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