Whether an LLC, or Limited Liability Company, seems to be the appropriate vehicle for your side company, you may be asking if you may register an LLC while working full-time.
Can I Form an LLC While Working or Employed?
Whether an LLC, or Limited Liability Company, seems to be the appropriate vehicle for your side company, you may be asking if you may register an LLC while working full-time.
Starting a company on the side while still doing your day job is a great way to get your feet wet in the entrepreneurial world. It’s also an excellent method to make some much-needed extra money. However, in most circumstances, you want to keep your normal work, whether it’s because the regular salary will assist your new start-up company remain afloat until it becomes financially viable, or you simply want to establish a side business to make some additional money. As a result, it’s a good idea to double-check that your plan to form an LLC will not have unintended effects for your career. Rules and Regulations for the Formation of a Limited Liability Company in a State
Because of state laws for organising an LLC, you may believe you are prohibited from forming an LLC while doing another employment.
State regulations governing LLC creation vary by state, but although there are various processes to follow depending on where you reside, states do not consider your job position when filing an application to create an LLC. When it comes to complying with the legal criteria necessary to form an LLC, whether or not you are employed at the time you establish a firm is unimportant in terms of your state’s LLC registration laws.
Your Employment Agreement
The language of your employment or work contract, or, if you don’t have an employment contract, your employer’s policy about employees operating side enterprises, is perhaps the most significant issue you’ll need to consider when beginning a small company on the side.
Is there, for example, a stipulation regarding ownership of ideas or innovations conceived or developed by you as part of your employment or during company time?
Often, any inventions made by an employee while on the job or while utilising company resources will be owned by the employer, so keep this in mind if your new side business includes the utilisation of such a new invention.
But what if your new venture does not include a novel invention or innovation? In such instance, will your side business compete with that of your employer? Is there any other potential conflict of interest with your employer as a consequence of you launching a company while still working?
Many employment contracts include non-compete clauses that prohibit employees from starting businesses that compete with their employer; employment contracts may also include clauses that prohibit employees from engaging in work outside of their job that creates a conflict of interest with their employment.
Should You Inform Your Boss?
There is some dispute over whether you should inform your employer that you have a side company. On the one hand, if your boss learns about your new business, he or she may begin to wonder about your devotion to your day job; there may also be some concern that you will utilise corporate resources and company time to concentrate on your own business. Your new firm, on the other hand, may provide a product or service that is excellent for your boss, who may become one of your company’s first clients. While it’s typically ideal to be as open and honest with your employer as possible, only you know your job conditions well enough to determine if you should inform your employer about your new business.
Managing Tax Issues
Unless you want to have your LLC taxed as a corporation, in which case your firm will pay LLC taxes as a distinct corporate entity and file its own corporate tax return, you will report your LLC income on Schedule C on Income Tax Form 1040.
Getting It to Work
So you’ve double-checked your employment contract and discovered that there’s nothing preventing you from launching your new company while still working at your day job. Here are a few pointers to help you manage a successful side company while working full-time:
Be mindful of the time commitment that a side business demands. While you will be working part-time on your new company, these hours will be in addition to your normal employment hours. This implies you’ll have a lot less time for personal matters.
Make a point of not working on your company while you’re at work. It may just take a few seconds to respond to a customer’s email, but those few seconds should not be spent on the time of your company. Separate your employment hours from your new business hours; succumbing to the desire to work on your own company while on the job is unethical and may get you in hot water with your boss.
You should not work on your business while on company time, and you should not utilise corporate resources or equipment for duties related to your own business. It may be tempting to make a few copies on your employer’s photocopier after hours, but this is unethical and may result in unfavourable results.