I'm starting to get inquiries from potential buyers for my business. I haven't shared any detailed financials yet, but I know I need a non-disclosure agreement (NDA) before I do. What are the key things I should include? Do I need a lawyer to draft it, or are there reliable templates? I'm in the US if that matters.
NDA
How to write a non-disclosure agreement when I sell my business?
You can find templates online, but for a business sale, it's worth having a lawyer review it. The main poinTs to cover are the definition of confidential information, the buyer's obligations to keep it secret, and the term of the agreement. Also, specify what happens to the information if the deal falls Through.
I used a template from a legal site for my last sale. It worked fine, but the buyer's lawyer made some changes. So be prepared for negotiation.
Make sure it includes a clause about not soliciting your employees or customers. That's often overlooked.
I'm a business broker, and I always recommend having an NDA that is mutual. Even though the buyer is the one receving info, a mutual NDA can make them more comfortable. Also, include a non-compete clause if you can, but that varies by state.
How detailed should the financial information be before the NDA? I'm not OP but in a similar boat.
Usually, you don't share anything sensitive until after the NDA is signed. You can provide high-level revenue ranges, but detailed P&L statements should wait.
Agreed. Don't give out customer lists or proprietary processes before the NDA.
One more thing: the term. Some buyers want a short term like 1 year, but yo might want longer. Also, define what constitutes a breach and the remedies. It's not just about keeping secrets; it's about what happens if they don't.
Is it necessary to have a lawyer draft it from scratch? That seems expensive. Could I use a template and then have a lawyer review it?
Yes, that's often more cost-effective. A lawyer review of a template template should catch any major issues. Just make sure the template is specific to business sales, not just general NDAs.
What about electronic signatures? Are they legally binding for NDAs?
Yes, electronic signatures are generally valid under the ESIGN Act and UETA. Just use a reputable e-signature service.
I've used DocuSign for NDAs before. No issues.
Also consider adding a clause about returning or destroying confidential information if the deal Doesn't go through. It's a good practice.