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A Non-Disclosure Agreement (NDA) is a legal contract that protects confidential information shared between two parties. In the context of buying or selling an online business, the NDA protects the seller’s intellectual property, trade secrets, and other sensitive information from being disclosed to competitors or the public.
💼 We provide a free NDA template in Microsoft Word format that you can use (please read the disclaimer before using the document). This template was drafted by an attorney for use with the potential sale of a website or online business.
What Is a Business Sale Non-Disclosure Agreement?
The purpose of an NDA (sometimes referred to as a “confidentiality agreement) is to ensure that the potential buyer doesn’t share confidential information about the business with anyone else. This includes information about the business’s operations, financials, customer data, and other proprietary information.
By signing an NDA, the potential buyer agrees to keep this information confidential and not to use it for any purpose other than evaluating the business for purchase. If the potential buyer breaches the NDA, they could be subject to legal action and damages.
The definition of “confidential information” may include trade secrets, customer lists, financial statements, and any other proprietary information that’s not publicly available. The purpose of the disclosure should be clearly stated in the agreement.
When To Use a Non-Disclosure Agreement
Many online business brokers and marketplaces provide basic details about websites and businesses listed for sale. Potential buyers may need to sign an NDA in order to see more detailed information, including the name of the business and website URL. These details are often not revealed publicly to protect the seller.
Once potential buyers sign the NDA, they will get access to more detailed information to determine if they’re interested in pursuing a possible acquisition.
If you’re selling a website or online business through a broker, they’ll probably handle all details related to collecting signed NDAs from potential buyers. However, if you’re selling the business without a broker, you may need to handle this part of the process.
Getting a signed NDA from potential buyers is recommended before sharing any sensitive information about your business. It’s better to be safe than sorry and protect your confidential information from being shared without your consent.
Types of Information Covered by NDA
Details of the NDA and the information protected can vary depending on the parties involved and the context of the sale. However, some common types of information covered by NDA during an online business sale may include:
- Proprietary information: Any other confidential information not publicly available that is deemed valuable to the business and its operations.
- Trade secrets: Any proprietary information that gives the business a competitive advantage, such as unique marketing strategies or product formulations.
- Financial information: This includes revenue, expenses, profit margins, and other financial details that could affect the value of the business.
- Customer data: This could include contact lists, purchase histories, and any other sensitive data related to the business’s customers.
- Strategic plans: Information about future plans, goals, or other strategic initiatives for the business.
- Employee details: This could include employee salaries and benefits, employment contracts, and any other sensitive information related to employees.
Typically, the NDA will protect any information that’s not publicly available. If the details become publicly available through no fault of the buyer, the buyer will not be held liable for any breach of the NDA.
Should the NDA Include a Non-Compete Clause?
A non-compete clause is a provision that restricts the signer from engaging in certain business activities that would compete with the other party. Non-competes are common as part of Asset Purchase Agreements when online businesses are sold; however, they’re typically not included in NDAs in the early stages of the process.
While it’s possible to include a non-compete clause in the NDA, doing so will likely reduce the number of potential buyers willing to sign it. Of course, reducing the interest in the business can hurt your chances of selling the business at a desirable price.
We also have other templates for various stages in the acquisition process: