Before you strike out on your own, keep these three tips in mind to help ensure a smoother transition to entrepreneurship.
Thinking of leaving your job to start your own company? It's a new year, and with it comes the inevitable "New Year's Resolutions," and the entrepreneurial aspirations of finally taking the leap to launch that new venture that is dominating your daydreams.
Before you strike out on your own, keep these three tips in mind to help ensure a smooth transition.
Check out your Agreements with your Current Employer
When you started at your current job, you more than likely signed a standard employment agreement with various restrictions. The most obvious obligations it holds you to involve proprietary information and ownership of company work product. What this means, essentially, is you cannot take your employer's confidential files with you. Also, the products, software code, or other materials that you created on behalf of the company while employed belong to the company—now and in the future. Taking these items with you, even a piece of code on an inconspicuous flash drive, can open the door to a claim by your former employer for breach of your agreement—or worse—intellectual property misappropriation and trade secrets theft.
Two additional restrictions that can vary from company to company (and state to state) are those regarding non-solicitation of employees and non-competition with your employer. Non-solicitation provisions restrict you from enticing company employees to join your new venture, while non-competition provisions limit your ability to work on a competing venture.
You should not blindly accept these provisions without taking the time to dig a little deeper. Getting a lawyer's advice here can help shed some light on the legality and enforceability of your restrictions and ways to work around them. In some states, such as California, non-competes are actually only enforceable in a handful of contexts. Moreover, in all states, courts have ruled that these kinds of restrictions must be "reasonable." For instance, a ten year non-compete is incredibly unlikely to pass judicial muster; and an employer cannot bring a successful claim for breaching a non-solicit if a new hire responds to a public job posting completely on her own accord and without contact from you. Your attorney can help you understand exactly what you can and cannot do—as well as the risks associated with various strategies.
Work on your New Project on your Own Time
In most, if not all states, your employer has no claim on work product that:
A. Is created on your own time;
B. Utilizes personal resources;
C. Is not a result of company work product;
D. Is not directly related to the employer's current line of business or actual or "demonstrably anticipated" R&D efforts.
If you want to make sure that your intellecutal property is actually your intellectual property, take the common-sense approach. Work on the project after hours and on weekends. Use your personal laptop and phone. Document your activities. Even create a separate email address for “new venture” correspondence. You need to make every effort to separate the day job from the new venture.
Despite the Temptation, Don't Leave in a Blaze of Glory
Last but not least, there is some crucial interpersonal guidance here. Disputes with former employees do not arise out of thin air. In the vast majority of cases, the former employee has ruffled feathers on the way out. The angry employer then decides to take legal action. You can go a long way to help cut out much of the departure-related drama. Here are the basics:
Be extremely cooperative in the transition.
Give your employer adequate notice of your exit (at least two weeks) and develop a master list of pending matters and critical action items.
Make it as easy as possible for the company to pick up where you left off.
Return all company materials in you possession.
Finally, be honest about what you are doing after you leave. Your employer will eventually find out one way or another, and you want to avoid making them feel duped about the circumstances of your departure.
ANDRE GHARAKHANIAN is the founding partner at Silicon Legal Strategy, the premier boutique law firm providing targeted, bottom-line-oriented advice to technology start-ups, innovative entrepreneurs, and seasoned investors.