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Should Your Business Be Using  Non-Disclosure Agreements?

At the core of many successful businesses lies a treasure trove of trade secrets—unique processes, formulas, or strategies that give a company a competitive edge. Whether it’s the secret sauce behind your best-selling product or the innovative approach that sets your services apart, trade secrets are invaluable. And, short of trade secrets, even just confidential business information can be gold. 

But even if you know how valuable your business’s confidential information is, are you taking the appropriate steps to safeguard it? Beyond using physical and digital security tools in your business, there is another tool that can provide a shield for your proprietary data: a Non-Disclosure Agreement (NDA). 

Today, we explore why your business should consider incorporating NDAs into its operations and how this legal tool can be a crucial asset in protecting your company’s valuable secrets. 

1 | NDAs Define the Scope of Confidentiality 

It may seem obvious to your employees and business associates what information belongs to your company and your company alone. But without an agreement that clearly identifies what company data is considered proprietary and confidential, you leave the door open for the interpretation of others – which can come back to bite you in the future.

Non-Disclosure Agreements allow businesses to precisely define what information is considered confidential. Doing this reduces the likelihood of someone disclosing your business information under the pretense that they thought it was public information. 

By clearly outlining the scope of confidentiality, both parties understand the boundaries of what can and cannot be shared. This specificity is crucial in preventing misunderstandings and disputes down the road.


2 | NDAs Set Clear Team Member Expectations

It takes a lot of people to make a business run smoothly. From employees and contractors to third-party vendors and business associates. But with the involvement of so many people comes the risk of someone accidentally (or intentionally) disclosing sensitive information about your company to outside sources. 

An NDA serves as a clear reminder to employees and associates that certain aspects of your business are confidential. Upon signing an NDA, they are legally bound to keep this information confidential during and after their tenure at your company. Depending on your business, this information could include proprietary technology, upcoming product releases, or customer lists.

Requiring new team members to sign an NDA at the beginning of their employment sets the tone from the very beginning that you’re serious about protecting your business interests and won’t tolerate the disclosure of confidential information.


3 | NDAs Provide Legal Recourse

An NDA establishes a legal framework, making it clear that divulging your company’s secrets without authorization is strictly prohibited. In the unfortunate event that a breach of confidentiality occurs, having an NDA in place provides a clear legal recourse. 

The NDA outlines the consequences of violating its terms, which may include financial penalties or legal action. This serves as a deterrent that discourages individuals and entities from compromising your business’s confidential information. 

If a breach does occur, having a signed, clear agreement between you and the breaching party will expedite the legal process necessary to finalize a resolution in your favor through mediation, arbitration, or court. Your NDA can also set the terms for what authority will be in charge of overseeing any conflict resolution – which is another time and money-saving benefit of a well-drafted Non-Disclosure Agreement.

Looking Out for Your Family and Your Finances

This article is a service of Trust Counsel, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.