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Nondisclosure agreements are sometimes called NDAs or confidentiality agreements. They are intended to protect information that will be released to you that is deemed confidential. This may include the business name and location, financial data, etc. By signing an NDA you are agreeing not to divulge this confidential information.  For example, an NDA is appropriate for prohibiting others from disclosing annual owner salaries, or other confidential material contained in a business summary provided by your Business Broker. Should you sign an NDA and use the confidential information without authorization, a court may award monetary damages to the business owner who’s confidential information you disclosed.

Nondisclosure agreements are there to  protect any type of trade secret or any information not generally made public.  In a business for sale inquiry, the purpose of these agreements is to create a confidential relationship between the business broker, who has trade secrets, financial records, employee information, etc. that may damage their listed business if made public and the potential business buyer to whom the information will be disclosed. It is there to protect both the business owner who is selling their business and the potential business buyer.

Typically a potential business buyer will be asked to sign a one-way agreement. This is used when only one party is making a disclosure—for example, when a business broker is asked to release the actual name and address of a confidential listing.

The signing party  must hold and maintain the protected information in strict confidence and limit its use, usually it is accepted that they discuss and share information with their financial advisors, attorney’s or the like. Under most state laws, the signing party cannot breach the confidential relationship, induce others to breach it, or induce others to acquire the secret by improper means. Most businesses buyers should know to accept these obligations without discussion.