Should I Use a Non-Disclosure Agreement When Selling My Business?

If you are planning to sell your business, you will need to discuss detailed information about your business operations, financials, and other sensitive information with prospective buyers. Understandably, this can make some business owners a little nervous. After all, confidential information that gets into the wrong hands can be used against you and your business, essentially undoing your years of hard work.

A non-disclosure agreement or confidentiality agreement is a legal contract used to prohibit parties from sharing certain information. An NDA can be a very useful tool during the sale of a business. With this legal protection in place, prospective buyers are prohibited from sharing proprietary information with competitors, employees, vendors, suppliers, customers, or other parties.

What to Include in Your Confidentiality Agreement

A non-disclosure agreement protects your confidential information and prohibits prospective buyers or other parties from sharing confidential information. The exact nature of your agreement will depend on your specific needs. However some of the most common information protected in a business sale confidentiality agreement includes:

• Profit and loss statements, balance sheets, KPIs, and other financial records
• Trade secrets
• Business operations and strategies
• Employee information
• Customer information
• Marketing strategies
• Intellectual property
• Any other information the seller wants to keep private

Risks of Not Using an NDA During a Business Sale

Asking prospective buyers to sign a confidentiality agreement is one way to vet buyers and determine if they are serious or not. This is a red flag if a prospective buyer is unwilling to sign an NDA.

Sellers who do not use an NDA to protect their proprietary information risk this information being used against them. Without an NDA in place, there is nothing stopping an alleged buyer from learning details about your business and using it to their advantage. The buyer may target your customers, undercut your prices, hire your employees, or steal your ideas.  

Contact our Naperville Business Sale Lawyers for Help

Any legitimate buyer is going to want to thoroughly investigate a business they are thinking about buying. This requires access to sensitive information that a business would not typically share with another party.

If you plan to sell your business, a non-disclosure agreement can be used to protect confidential information and ensure that it is not used against you. However, an NDA must be drafted correctly in order to be legally binding.

The Naperville business law attorneys at the Gierach Law Firm have extensive experience in business contracts and business sales. We can help you set up the legal protections you need. Call 630-756-1160 for a confidential consultation.

Source:

https://www.investopedia.com/terms/n/nda.asp