Prospective partner refuses to sign no-compete as person

One of you is likely over complicating things.

Hard to say which one, but my guess is with him.

His LLC is insured. He can also dissolve it easily, leaving you trying to collect from a vaporized entity.

Think long and hard about this one. Early interactions can be indicators of what future business discussions will be like.

What is the non-compete- is it for a narrow term and scope (say 1 year, competing in the same business)? If he won't sign that personally, I'd run away- more because of his shady rationale for wanting only the LLC to sign it though. That's a dodgy rationale.

You're not going to waste your time or money enforcing it anyway, so what do you care?

Either you trust him, or you don't. Based on the fact you asked this question....I'd guess you don't...so just keep lookin.

I am sure that there are wonderful and legitimate reasons for him to want to only sign through his LLC. And I am sure that there are wonderful and legitimate reasons for you to want him to sign as an individual. I am not a lawyer nor do I play one on television, so I can't speak to those.

I do know that in many locations and industry a non-compete is very very difficult to enforce. You can't deprive someone of their livelihood for example. I also know that, like NDA's, the agreement is only as good as your ability to defend and protect it. Ability usually means money.

If you are doing well and have earned the money to defend a non-compete-- he, as your partner is probably earning a good return and doesn't desire to leave. If on the other hand he wants to leave because he thinks he can do better alone -- well that is probably because you aren't doing well, and wont have the money to defend the non-compete anyway.

My business partner's phone number shows up in my auto-generated favorites (based on call volume) more than my significant other. While she doesn't like this much it is an accurate reflection of the level of contact and communication that happens between business partners.

You are about to get in bed with this guy. Do you trust him? As important in the development of a new business partnership as the financials, the business plan, the market analysis, the value proposition, the pie-in-the-sky numbers is the team. Do they know each other and work well together?

I would see this disagreement about the signing of a non-compete as a yellow flag that the "team" needs some work before it takes to the field.

I have an LLC of my own, and I could go either way on this sort of thing. I think that I'd be likely to want the LLC to enter in the agreement if I thought there was a likelihood of conflict otherwise.

Alternatively, he may just not trust you, and wants the protection of one step of separation provided by the LLC.

He could be shady, or he could just be misunderstanding how things really need to work. There's a lot of popular (crappy) info out there about "incorporate/organize and do everything through your corporation/LLC!"

Who are you partnering with--the guy, or the LLC? I presume the latter? If you are partnering with the LLC, you'll want the noncompete to apply to BOTH the entity AND him (and any other entities that he has a specified interest in), with him signing personally and on behalf of the LLC. (In the unlikely event he sells the LLC, you want any restrictions to still apply to the LLC.) If you're just partnering with him personally, then ask him why the LLC should be a party. It wouldn't make sense.

Have you talked through the situation with him and helped him to understand that if only the LLC signs, then he can easily get around noncompete restrictions (without involving lawyers)?

If you're worried about him sharing your IP at his next company, then an NDA should prevent that. If you're worried about him trying to use your IP as the basis for creating another startup, an intellectual property agreement should prevent that. I don't see non-competes as being that useful in most normal scenarios, other than being a scare tactic of employers.