Selling Your Minority Interest: Owner-only

[Originally published May 9, 2011 at California Corporate Lawyer]

Selling a minority interest in a privately held business in California
must be handled thoughtfully. First, if you are able to sell a minority
interest in a privately held business for a profit (whether small or
substantial) you are already on a good path. This article address some
consideration for an individual minority owner only (e.g. not an
owner-employee).

The good news is that you are getting paid for
your hard work and getting a return on your investment. These are the
rewards that capitalism provides. The bad news is that your Company may
try to limit your ability to own and operate a similar business for a
period of years or within a specific geographic region through a
non-compete agreement.

You may say, "Wait, I read
http://alglaborlaw.blogspot.com/2008/08/non-competition-clauses-in-california.html,
which says non-compete agreements are void in California." They are
….for employees.

However, there are narrow exceptions under
16601, 16602 and 16602.5 which provide that a seller of "substantially
all" of his/her/its assets, goodwill or interest in a business "may
agree with the buyer to refrain from carrying on a similar business
within a specified geographic area in which the business so sold, or
that of the business entity, division, or subsidiary has been carried
on, so long as the buyer, or any person deriving title to the goodwill
or ownership interest from the buyer, carries on a like business
therein."

Due to the "may" language this
will naturally result in a negotiation of the future restrictions on the
activity of the seller, which will often become a material business
point affecting the pruchase price paid for the Seller’s shares or
whether the sale will even be consummated.

Adishian Law Group,
P.C. assists owners of privately held companies in the negotiation and
sale of their shares or membership interests to maximize the value of
their ownership interest while allowing them reasonable freedom to
pursue their next entrepreneurial dream or investment. If you are
contemplating the sale of your interest in a corporation, limited
liability company or partnership, we recommend that you consult and
attorney before concluding the purchase and sale agreements.

Note:
The information contained is not legal advice and does not establish an
attorney-client relationship. Our contact information is included and
we always offer a free consultation. For more information about SELLING
THE COMPANY, SELLING SHARES, SELLING MEMBERSHIP INTERESTS, SELLING
PARTNERSHIP INTERESTS, LIMITED LIABILITY COMPANIES, CORPORATE LAW and
other areas of law, please visit http://www.AdishianLaw.com, contact us
via email to askalg@adishianlaw.com or call us at 415.955.0888 or
310.726.0888. Copyright Adishian Law Group, P.C. 2011.

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Christopher M. Adishian, Esq.

Licensed since 1994

Member at firm Adishian Law Group, P.C.

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Christopher M. Adishian, Esq.

Licensed since 1994

Member at firm Adishian Law Group, P.C.

AWARDS

AV Preeminent
Champion Badge Gold

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