In virtually every business, confidentiality is a major concern. Most business owners want to keep the fact that they are selling their business confidential. At the same time, business owners want to sell their business as quickly as possible, and they want to receive top dollar for it. In order to sell a business for top dollar and quickly it is usually necessary to present the business to a range of prospects. You can’t sell a business without letting prospective buyers know that it is for sale. When selling a business, you will need a confidentiality agreement.
Here are a few key points your confidentiality agreement should cover.
- Type of Negotiations
Your confidentiality agreement should cover whether or not the negotiations are open or secret and exactly what kind of information can be disclosed.
- Duration of Agreement
The length of time the agreement will be in effect must be specified in your confidentiality agreement.
- Special Considerations
There are other considerations, for example, does your business hold any patents? A buyer could learn about your inventions during the buying process. Make sure that your confidentiality agreement protects your paten and copyright interests.
- State Laws
If the other party is based in a state different than yours, your confidentiality agreement must factor in different state laws.
- Recourse in the Case of Breach
If the agreement is breached, your confidentiality agreement should outline what recourse you will have. Having a confidentiality agreement does not offer 100% protection against a violation. However, it does ensure that prospective buyers understand the seriousness of the situation and that there are consequences if the agreement is not followed.
A confidentiality agreement allows a seller to share confidential information with a business broker or a prospective buyer so that a business can be properly evaluated. All parties involved need to realize that a confidentiality agreement is a legally binding agreement that is enforceable in a court of law.
It is important that you have your confidentiality agreement drawn up by a legal professional. A business owner can sell his or her business with some degree of confidence that information shared will not be disclosed.