Non-disclosure agreements are extremely common. However, many people are not sure what they are, why they are needed and how they can help a business. A non-disclosure agreement can be made between a business and any party it works with. This can be an employee, lender, independent contractor or manufacturer. The agreement limits what the individual can say about the company, including disclosing what they are working on for the company. If you are thinking about having people associated with your company sign one, you may be wondering what the benefits are. Here are three reasons why non-disclosure agreements are necessary for your business.
Keep a Competitive Edge
One of the biggest benefits to a non-disclosure agreement is that they help you keep your competitive edge. Employees can’t discuss your company secrets or projects with other businesses if they’ve signed a non-disclosure agreement. This helps you keep projects under wraps until they can be patented or further developed. It also ensures other companies don’t take your ideas or your plans.
Another significant benefit of non-disclosure agreements is that they help your business maintain confidentiality. No one needs to know what loans you apply for, which products are selling or failing, or how your business runs its day to day operations. Unfortunately, without this agreement, your employees can share this information with anyone they wish, including newspapers and competitors. A non-disclosure agreement may also help keep disgruntled employees from negatively discussing your business or products, which is crucial.
Protect News on Growth
The last benefit to a non-disclosure agreement is that it helps protect the growth of your business from being made public if you are not a publicly traded company. If your business is struggling to pay bills or you are downsizing, this can look bad to vendors or suppliers. They may cut your credit terms or refuse to do business with you for fear of not getting paid. With a non-disclosure agreement in place, you have time to get your affairs in order and quietly reorganize. Likewise, you may not want to brag about your company’s growth or projected growth, as vendors or suppliers may be tempted to raise costs on you if they know you have more cashflow. A non-disclosure agreement with vendors, manufacturers and employees also keeps this quiet.
Write Your Non-Disclosure Agreement
The benefits of this document are clear. However, many businesses draw up their own, without realizing that the wording in the contract may not be legally binding. This negates the benefits of this type of legal document. If you are looking into having employees, independent contractors or suppliers sign a non-disclosure agreement about your business, let an attorney draw the forms up for you to ensure they are binding. Shelton Law & Associates can help you with all of your business legal needs, including non-disclosure agreements. Give us a call today to set up a consultation.