What Should Be Included in a Non-Disclosure Agreement for a Small Business? 

Protecting your small business’s confidential information is critical to maintaining your competitive edge. A well-crafted non-disclosure agreement (NDA) provides the legal framework you need to safeguard trade secrets, proprietary processes, client lists and other sensitive business information. At McNeelyLaw LLP, our experienced business attorneys help small businesses throughout Indiana create comprehensive NDAs tailored to their specific needs.

Here’s what to include in your small business’s NDA:

• Clear definition of confidential information and specific exclusions
• Permitted disclosures and authorized access parameters
• Duration of confidentiality obligations
• Requirements for return or destruction of materials
• Remedies for breach and dispute resolution mechanisms

What Information Should Be Defined as Confidential?

The foundation of any effective NDA lies in clearly defining what constitutes confidential information. Your agreement should specifically identify the types of information you’re protecting while avoiding overly broad language that courts may find unenforceable.

Categories to consider including:

• Technical information such as processes, formulas, designs and manufacturing methods
• Business information, including customer lists, financial data, marketing strategies and pricing structures
• Proprietary information like software code, algorithms and product specifications
• Strategic plans covering expansion initiatives, acquisition targets and partnership negotiations

Equally important are the exclusions. Most NDAs specify that confidential information does not include that which is:

• Already in the public domain
• Independently developed by the receiving party
• Lawfully obtained from third parties
• Required to be disclosed by law or court order

These exclusions help make your NDA reasonable and enforceable while protecting your legitimate business interests.

Who Can Access the Confidential Information?

Your NDA should clearly specify who may receive confidential information and under what circumstances. This section defines the boundaries of permitted disclosure and helps prevent unauthorized sharing.

Consider addressing:

• Whether the receiving party can share information with employees, contractors or advisors
• What security measures must be in place for any permitted sharing
• Whether advance written consent is required for specific types of disclosure
• How to handle situations where disclosure is legally required

For example, you might allow a contractor to share limited information with their team members who are directly working on your project, provided those individuals also sign confidentiality agreements.

How Long Should Confidentiality Obligations Last?

The term of your NDA should reflect the nature of your confidential information and industry standards. Courts generally look more favorably on agreements with reasonable time limits.

Common duration approaches include:

• 2 to 5 years for most business information and strategic plans
• Indefinite protection for true trade secrets that derive ongoing value from secrecy
• Specific periods tied to project completion or business relationship duration
• Different terms for different categories of information

Speaking with a business attorney can help you determine appropriate timeframes based on your industry, the type of information being protected and the business relationship involved.

What Happens to Materials When the Agreement Ends?

Your NDA should specify what the receiving party must do with confidential materials once the agreement terminates or the business relationship ends.

Standard provisions typically require the receiving party to:

• Return all documents, files and materials containing confidential information
• Delete or destroy all electronic copies and backups
• Provide written certification that all materials have been returned or destroyed
• Continue to maintain confidentiality even after returning materials

This return or destruction requirement helps you maintain control over your sensitive information and limits potential future misuse.

What Are the Consequences of Breaking an NDA?

A strong NDA includes clear remedies and enforcement provisions that outline the consequences of breach. These provisions serve both as deterrents and as practical solutions if violations occur.

Your agreement should address:

• Monetary damages for actual losses caused by unauthorized disclosure
• Injunctive relief allowing you to seek court orders stopping further disclosure
• Recovery of attorney’s fees and legal costs
• Requirement to account for any profits gained from the misuse of confidential information

Many NDAs also specify dispute resolution methods, such as mediation, before pursuing litigation. Including a choice of law provision that designates Indiana law can provide clarity and predictability in enforcement.

Protect Your Business With Professional Legal Guidance

Creating an effective NDA requires balancing comprehensive protection with enforceability. An agreement that’s too broad may be struck down by courts, while one that’s too narrow may leave critical information unprotected.

The business law attorneys at McNeelyLaw LLP bring over 50 years of combined legal experience to help small businesses throughout Indiana protect their valuable confidential information. We take the time to understand your specific business needs and create NDAs that provide meaningful protection while remaining enforceable under Indiana law. Contact us to schedule a consultation with one of our experienced business attorneys.