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How Nondisclosure Agreements are Critical to a Business

F. Michael Ayaz

Operating a business in California can be complicated. People who are unfamiliar with the requirements can face unanticipated problems. One common issue is protecting their ideas with nondisclosure agreements. It is important to understand when an NDA is needed.

The NDA and what it does can be essential. An NDA is meant to prevent a company’s ideas and innovations from being revealed to competitors. With the agreement, anyone who is aware of the product or idea is legally prevented from sharing it. It can be signed by a supplier, a client, an employee, an investor, a creditor or anyone else who has knowledge about the company’s product. The NDA will detail the amount of time for which the information cannot be shared.

Since businesses will frequently need outside help, it is wise to have an NDA. Investors will want to know where their money is going. Clients will request information on what the product or idea does and how it benefits them. Prospective employees must be aware of the work they will be asked to do. Not only can the product itself be part of the NDA, but sales lists, clients and anything else that differentiates one company from another can too.

Public records like information for the Securities and Exchange Commission cannot be part of an NDA. The NDA can be mutual or unilateral. A mutual NDA will be used by businesses that are working together to further the partnership and achieve their goals. A unilateral NDA is a stipulation that one side in the agreement will not share what he or she has learned. Businesses should be cognizant of how an NDA will protect and benefit them. Having legal assistance can be useful when preparing a nondisclosure agreement.

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