QUESTION ON Leaving a Startup Company and Non-Compete Agreements
I am a young professional. I recently chose to withdraw from a startup company prior to its incorporation. I had approached the other key individual with the idea for the startup in fall of 2005. Over the course of 6-8 months of working with the individual I discovered that I could not work with him over the long term. There were 6 other proposed minority share holders. Prior to the incorporation I stated that I wanted no further business association with the group.
Approximately 2 weeks after this they incorporated and then sent me a release form that includes a non compete agreement that extends for 5 years and for a product that I had undertaken independently that has not yet been developed. Up to this point I have received not a single cent in compensation for contributions. It is my opinion that I never signed a non compete previously and that I certainly will not sign one now. Is there any grounds in this scenario for them to force this non-compete? I understand that I would not be able to take customer lists with me, but as of yet there is not a single customer.
– Gerald T. Riley – Maryland
I am not an attorney, but to the question of whether someone can force you to sign an agreement, the answer is no. At least they shouldn’t. If someone were to force you to sign a contract under threat or intimidation, that is generally referred to as coercion–and agreements that are shown to be signed under duress or coercion typically do not hold up in court. But I digress.
The nature of your relationship with the corporation is unclear to me, particularly since the corporation technically did not even exist until after you severed ties with one of its shareholders. Also unclear is what exactly may be at stake here.
Bottom line: If you suspect that the corporation plans to use or sell a product or intellectual property to which you lay claim, you should consult an attorney to discuss copyright protection and infringement, as well as for guidance with respect to your rights to compete in the marketplace.
Recommended Books on S Corporation:
- Practical Guide to S Corporations (Fifth Edition)
- S-Corporation: Small Business Start-Up Kit
- Taxation of S Corporations in a Nutshell (In a Nutshell (West Publishing))
- S Corporation Taxation (2012)
- How to Add an Officer to an S Corporation
- How to Add a Partner to an S Corporation
- How a Corporation Can Elect to be an S Corporation
- Can a Subsidiary LLC be a Managing Member of Its Parent LLC ?
- How to Reduce Capital Gains Tax of a C Corporation