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What to Look For When You Invest in a Business

In order to protect a business’ trade secrets, business models, and other sensitive information, a business attorney may advise a client to incorporate non-compete and non-disclosure agreements in a manner that makes sense for the particular needs of the business. Non-compete agreements and non-disclosure agreements (NDAs) can often create a more secure and trusted partnership between business professionals and their employees or business partners. This is especially important when trying to determine if a particular business relationship or employment relationship is in both parties’ best interests.

Creating a non-compete agreement can protect a business and help establish trust and security between two parties: employer and employee. A non-compete agreement often states that, if employment ends, the former employee will not enter into or start a similar business or profession in competition with his or her former employer. The non-compete agreement must state a specific and reasonable scope of such restrictions, a timeframe for the restrictions, and a geographic area in which the restrictions apply.

The motivation behind asking an employee to sign such an agreement is not to hinder his or her advancement in the business world; rather, a non-compete agreement can help clarify what the employer and employee are exchanging.

From the business owner’s perspective, the non-compete is the company’s way of saying, “I really want to hire you, and I believe that we will have a great future together. When I hire you I will be revealing valuable information about our products, services, clients, trade secrets, proprietary and/or confidential information, business model and more. This information is something that our company has worked hard, and invested significant resources, to develop. So in exchange for your employment with my company, I am going to ask that for a certain period of time, that you not use the information you obtain while working with our company to go start your own business or work for another business that is in direct competition with us.”

A non-compete agreement should be well written with clear and specific language. Contact a business law attorney to discuss when a non-compete agreement is appropriate, what language it must include and why.

To further ensure the security of a business, a business that wishes to protect sensitive information should strongly consider implementing a non-disclosure agreement (NDA). A non-disclosure agreement is a contract between two or more parties in which certain parties are going to be provided with specific information or knowledge (often proprietary or confidential information, trade secrets, business strategies and more) that the revealing party does not want to be shared with third parties.

Non-disclosure agreements are often entered into by separate businesses, or by partners of the same business. A non-disclosure agreement, may be crucial to secure the trust in a new relationship between businesses. Often, one business is considering partnering with another business, but in order to vet the potential relationship, one business must reveal valuable information about its plans, business strategy, product, service or otherwise. A non-disclosure agreement can secure the confidence and trust between the parties and allow them to discuss the full details of the potential relationship.

When two or more partners share ownership of a business, drafting a non-disclosure agreement can help to maintain trust between those partners. If there is no non-disclosure agreement and a partnership goes awry or the business ownership changes hands, business secrets and confidential or proprietary information may go unprotected. The consequences to the business could be devastating. A former partner might share sensitive information with competing businesses or otherwise use the information in a manner that damages the unprotected business. To avoid such consequences, consult a¬†business contract drafting attorney¬†business contract drafting attorney who can advise you on how to build trust among partners and protect the company’s most valuable information.

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