Getting your new business started
New businesses pop up overnight. Perhaps you are the prototypical American entrepreneur or are a serial entrepreneur.
Perhaps you are the victim of the past economic downturn and have been forced to consider going into business for yourself.
While starting a new business is never an easy task, technology has made startups and, in many cases, forming new business ventures much easier.
Choosing a business structure
You are permitted by State laws to create a legal entity, which is a separate identity from you, under which you can transact business without, in certain cases, the risk of exposing your personal assets to any liability that might arise out of your business affairs. Common types of business entities include sole proprietorships, partnerships, limited liability companies (LLC), and corporations. The type of business structure you select can help you minimize taxes, avoid legal problems, and reduce or eliminate exposure of your personal assets.
When to get started
You might decide to keep your current job as a means of support while starting your new business venture. If you decide to continue to work for your current employer and moonlight, be cautions to avoid pitfalls. Keep your current work performance and schedule consistent with past practices. Avoid working for your new business venture on company time while being paid from your current employer. Don't use company property like computers, email, phones or other resources for your new business venture.
Avoiding problems with current employer
Leaving your employer to start a new business can expose you to potential legal problems. Most employees are employed at-will and can leave at any time. However, if you have an employment agreement you may have to give advanced notice to your employer to quit. When you decide to leave your current employer to go into a new business venture, make sure you follow any required criteria when leaving. In all events, be courteous to your employer and exit on good terms.
What not to do with your current employer
An employment agreement may restrict your competition. If so, you need to be aware of the nature and scope of the restriction. A noncompetition clause generally prohibits you from competing with your current employer for a certain period of time after leaving and in a defined geographic area.
Do not take property belonging to your current employer when you quit. Even if you created the property during your employment, your current employer has intellectual property rights to such things as customer lists and information, computer software and manuals, formulas. Additionally, the Illinois Trade Secrets Act protects an employer's trade secrets from misappropriation. “Trade secrets” means information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that: (1) are sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.
You face serious legal consequences for taking or using intellectual property that belongs to your current employer. Don't start your business off by subjecting it to litigation.
Be careful when soliciting co-workers to quit and work for your new business. Again, an employment agreement may restrict you from soliciting employees from your current employer for a certain period of time. If you do hire co-workers, they need to be warned not to take or use information or property that belongs to your current employer. Your current employer may sue your new business venture and the co-worker if the co-worker violates an employment contract by quitting and going to work for you or misappropriates intellectual property or trade secrets.
Before starting a business, it is a good idea to hire a business lawyer and accountant so that you understand the legal and tax issues involved. Enjoy the journey, starting a new business venture is exciting.
• John E. O'Connor III is a partner with the law firm Drost, Kivlahan, McMahon & O'Connor LLC in Arlington Heights. Contact him at joconnor@dkmolaw.com.