Can I Start a Business While I am Still Employed?

You still have a job—yet you are itching to start a business. You might wonder if you have the time to do so, or if you are even allowed to do so. The answer depends on whether you signed an employment agreement and what kind of role you have with your current employer.

Here are some considerations if you wish to join the more than 24 million Americans who dream about being their own boss.

Check Your Employment Contract
When your current employer hired you, you likely negotiated pay rate and vacation time, you talked about benefits, and after consideration, you decided to accept the position. But think back to the onboarding process: You may have signed an employment contract that outlines your dos and don’ts as an employee. You may have signed it without even thinking about it, but it’s crucial that you dig it up to take a look at it. It may have included clauses that can prohibit you from competing with your current employer.

For example, some employers have clauses in their contracts that allow them to claim ownership of your inventions or innovations while an employee. Some employers have a noncompete clause that prevents you from working for a competitor or even starting a competing venture for a specific amount of time. They could also have a clause that prevents you from soliciting customers or clients (including customers or clients you may have brought to your employer) or co-workers.

You may have also signed a nondisclosure agreement (NDA). This type of agreement is designed to keep employees from talking about, sharing, or disclosing company methods and secrets. If you start a new business, you almost certainly cannot take your company’s methods, trade secrets, client lists, or other proprietary information with you.  

Bottom line: Be sure to check any employment agreements that you have with your current employer for pertinent clauses.

​Review Your Role
Even without an employment agreement, your position with your current company may prevent you from starting a competing business venture. If you are an officer, director, or manager, you are likely considered a key employee. Both key and skilled employees (i.e., software developers, marketing specialists, sales representatives) are presumed to owe some fiduciary duties to their employer, even in the absence of an employment agreement. As a result, key and skilled employees can begin preparing to start a competing business, but they cannot begin business operations while still employed.
However, if your business idea is one that would not compete with your current employer, then you are generally permitted to plan your business and begin operations as long as doing so (a) doesn’t interfere with your responsibilities and (b) isn’t prohibited by an employment agreement or other company policies.

Determine If You Will Talk About Your Plans With Your Boss
If you have read your employment documents and have decided to go ahead with your new business, you might have also found out that you are required to tell management about your plans. If there isn’t such a clause in your employment contract, experts disagree as to whether you should say anything or not.
For example, Tom Scarda, CEO and founder of The Franchise Academy, advises against it. He explains that running your own business is likely to compromise the quality and production you are currently providing your employer. If they know the reason for this, they might start looking for a replacement before you are ready to quit.

Others recommend that you be open and honest about your new business and when you expect to work on it. They believe it will make your professional life easier in the long run because such transparency creates trust. If you decide to go this route, reassure management that your current performance at work will not suffer. But you should be aware that most employment is “at-will,” meaning your current employer can typically fire you at any time for almost any reason, including the fact that you’ve indicated you’ve got “one foot out the door.”

Since most employed full-time employees who start their own business need the financial safety net of their current job, work hard to maintain a good relationship with your employer, both now and even after you resign.

Bottom line: Weigh the pros and cons of telling your employer about your new business carefully.

Don’t Take Advantage of Your Current Employer
When employers find out that employees are starting their own venture, their first worry is that this could take away from their current productivity. Maintain a clear line of separation between your current job and your new venture. Don’t conduct your own business during working hours. Don’t pilfer office supplies or software from your current employer. Don’t use any of your employer’s resources. This is not just unethical—it’s actually stealing.

You should also refrain from poaching co-workers or clients from under your employer’s nose. Even without a non-solicitation clause in your employment agreements, this type of activity could still lead to lawsuits against you and your new business for tortious interference with business relations.
Bottom line: Boundaries are key. If you are starting a new business, put in your time on the weekends or before or after your working hours—never during. And start planning now for what happens If you lose your job earlier than expected.

A Note to Remote Workers
Over the past year and a half, many workers have started working from home because of COVID-19. This blurs the lines between working hours and personal time. For some, this is a problem; for others, this presents an opportunity.

One of the advantages of working remotely is that you can often choose the hours you work each day. In addition, without a commute, you will likely have more free time during the day. As long as you are putting in the necessary effort into your current employment position, this could be an excellent opportunity to start a new business.

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​If you have questions about your current situation, or you are considering starting a new business, then schedule a consultation today.

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