A cofounder non-compete clause limits what a founder can do after they leave, usually starting or joining a competitor for a set time. A non-solicit clause stops them taking your staff or customers. Agree both when you sign your founders agreement, keep them narrow, and check them against the law where each founder is based.
This is general information, not legal advice. Whether a clause holds depends on where you are, so have a lawyer draft or check yours.
Why agree this before anyone leaves?
Because the day you need it, trust is already gone. Signed at the start, when nobody knows who will leave first, the terms get set fairly. Proposed in the middle of a breakup, the same clause becomes one more thing to fight about.
Treat it like your founders agreement and your IP assignment: cheap and calm to agree early, expensive and contested once someone has a reason to object.
What should a non-compete clause cover?
Four points. Vague wording on any of them is where problems start.
| Point | The question it answers |
|---|---|
| Activity | Starting a rival only, or also joining, advising or investing in one? |
| Area | Where does it apply? Match it to where you actually sell. |
| Length | How long after they leave? |
| Trigger | Does it apply the same way if they quit, are removed, or the company closes? |
Narrow beats broad. In Westaway's words, when the scope is more narrow and the duration is shorter, the non-compete is more likely to be enforceable. Overreach can cost you the whole clause. Dentons, writing on Ontario law, notes that courts generally strike down a problematic agreement rather than rewrite it, and that reasonableness covers the scope of the activity that the employee is prohibited from undertaking as well as its length and area.
What should a non-solicit clause cover?
Your people and your customers. Cornell's Legal Information Institute defines a non-solicit as a provision that limits a person from soliciting specified customers, clients, employees, or other business relationships.
- Employees. The departing founder may not recruit your current staff for a set period.
- Customers. They may not chase your existing customers for the same period.
A non-solicit leaves the person free to keep working in the field, so it restricts much less. Dentons notes that the interests a non-compete protects can often be protected adequately by non-solicitation and confidentiality (or non-disclosure) agreements. Many founders lead with those and treat a non-compete as an extra layer where the law allows one.
Where does the law differ?
A lot, and founders often assume a common clause is valid everywhere. In the US, employment law is based on the state where the employee is based. Foley & Lardner's 2026 overview lists California as noncompetes are void, with very limited exceptions for the sale of a business, and North Dakota and Oklahoma as full bans too. Many other states require a non-compete to be reasonable in scope and length and to protect a legitimate business interest.
There is no national US ban in force. Foley reports that a Texas federal court blocked the FTC's rule nationwide in August 2024 and the agency withdrew its appeal in September 2025, so state law still decides. Non-solicits vary as well: their enforceability, per Cornell, is primarily governed by state law and varies considerably. Outside the US, check local rules with a local lawyer.
How does this fit your exit plan?
These clauses matter most in three moments: a co-founder leaves, a co-founder is removed, or the company closes. Write each case into the clause. Closure is the one people forget. If the business ends and you both want to keep working in the same space, a clause written only for "one leaves, one stays" may say nothing useful.
Keep these terms next to your equity terms for a departing co-founder and your plan for a cofounder breakup. If tension around an exit is already building, read our cofounder conflict resolution guide before it turns into a legal fight.
Frequently asked questions
- Is a cofounder non-compete clause enforceable?
- It depends on where the founder is based. In the US, California, North Dakota and Oklahoma treat non-competes as void outside narrow cases such as selling a business. Many other places enforce one only if its scope, length and area are reasonable. Have a lawyer check your clause against the law that applies to you.
- What is the difference between a non-compete and a non-solicit?
- A non-compete stops a departing co-founder from starting or joining a competing business for a set time. A non-solicit leaves them free to work in the field but stops them recruiting your employees or chasing your customers. Because it restricts less, a non-solicit is often easier to defend if it is ever challenged.
- How long should a cofounder non-compete last?
- There is no number that works everywhere. As a rule, the narrower the activity and the shorter the period, the more likely a court is to enforce it. Match the length to what the business truly needs to protect, such as key customer relationships, and ask a lawyer what is reasonable where you operate.
- Should a startup rely on non-solicit and confidentiality terms instead?
- Often, yes. A non-solicit, a confidentiality clause and a proper IP assignment protect most of what founders worry about: staff, customers, know-how and the product itself. A non-compete can sit on top where the law allows it. Ask your lawyer which combination fits your situation before you sign anything.