Business owners often underestimate the value of a well drafted NDA. But once they’ve experience a theft of their information, or realize they shared more than they should, they quickly regret the lack of security.
There’s no need to wait for a breach of your information. Let’s talk about why your business needs an NDA today.
What is an NDA?
An NDA or non-disclosure agreement is a contract you have someone sign stating that they will keep the confidential information you share with them private.
Think of it as the guard at the front gate. You’ll use this gem to protect your ideas and prevent potential competitors from stealing your concepts and know-how.
When to Use One
You may work with contractors, business partners, clients and employees who have access to your sensitive business information.
An NDA may cover your source materials or ingredients, your internal processes, trade secrets, codes, finances, marketing techniques and creative process. It covers the inner makings that make your business successful.
If a contractor will work on a project for your business or an employee will have access to your most valuable data, use an NDA to protect yourself during the length of the project or their employment and thereafter.
The ideas and processes you pour into your business are valuable intellectual property ("IP"). Your IP is just as valuable as the services or products it creates!
NDAs help prevent others from taking these creative assets with them when your business relationship ends.
Do online businesses need an NDA?
Absolutely! Online businesses are particularly vulnerable to having information stolen. The internet can be a bit like the Wild West when it comes to ideas, so it is important to use an NDA as you establish connections with others to create projects online.
As you share information with business prospects, be aware that they can reverse engineer your product or figure out the processes that drive your services based on the confidential information you share.
Customers who would normally gravitate to your website may seek them instead so it is important to safeguard your knowledge.
Types of NDA
NDAs are typically either unilateral or mutual. Unilateral NDAs are one-sided meaning you require protection of your confidential information only.
For example, if you are hiring a developer to create an app for your business or a buyer will view your financial books in consideration of a purchase then only a unilateral NDA may be necessary.
Unilateral NDAs are also used with employees who will handle sensitive company information.
With mutual NDAS, the requirement goes both ways. When bothparties are exchanging proprietary data the mutual NDA is the way to go.
You may be uncomfortable asking potential business associates or employees to sign an NDA.
What if it appears as a lack of trust on your part so early in a professional relationship?
Well, if the other side balks at signing a short NDA that protects your interests (they’re usually 2-3 pages), then you’ll have to consider whether to take that risk.
Most individuals with no ulterior motive other than to collaborate together will have no qualms with signing a fair, properly drafted NDA.
You can also offer a mutual NDA instead, which will protect the input of both businesses and give the other side some additional value (aside from getting to work with you) in exchange for their signature.
Use an NDA when entering a contractual relationship with another individual or business that will have access to your confidential information for a period of time.
Try to work with companies and employees who value protecting ideas and are open to signing either a unilateral or mutual NDA if private data will be shared.
Need an NDA?
Not all non-disclosure agreements are the same. Have the right legal terms in place to prevent another company from breaking through your legal defense. Legal Goodness offers non-disclosure templates that you can easily edit with your personal business info. Save time and money by doing it yourself with our business templates, guides and resources to keep you legally protected.
Solid Legal Protection
Want a robust contract bundle instead? Purchase an NDA template as part of 15 legal templates inLegally Good Club.
To learn more about Legally Good Club and get tips on how to protect your business legally starting today, watch my free legal workshop.
This blog posting is provided for general informational and educational purposes only and is not provided for specific, individual legal advice.