Does my employer need to know?

[toddmeister]

Hi everyone,

I work full-time for an electrical wholesaler selling to trade. As a sideline I'm looking at starting an ecommerce site of my own. It will be loosely linked to my work in that the site will sell a specific range of products rather than a broad range like we do at work.
Initially as the site will be a bit of an experiment to "test the waters" I don't want my employer to know about the site, at least until if and when it started generating sales. So my questions I guess are as follows:-

1) Is there any legal requirement to inform my employer at this early stage?

2) if I register a company is there any way my employer will be informed? Eg by tax office or any other way?

3) if the site takes off and I have to register for vat/pay tax etc how would I pay this/calculate what I owe in addition to my standard full-time salary?

4) how long could the site trade in its "testing" phase before I would have to inform the tax office/register a company?

Many thanks


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[TradeSmart]

You will need to refer to your contract/company rules regarding setting up a business whilst being employed there.

There is generally no rule against it. However, most companies will forbid it if it is a conflict of interest with their business. Are the products you will be selling, also available to buy from your employer ? if they are there is no way your employer would allow it.

If you decide to do it anyway and don't tell your employer, you will almost certainly be dismissed for breach of contract if they find out.

 

[toddmeister]

I agree the site will in effect be in competition with my employer and also it would result in at the very least a disciplinary. But I guess what I'm asking is is there any direct link or government office that would contact my employer for any reason when it came to me registering a company?

For example could the tax office approach my employer to request my current salary info etc if they wanted to check anything?

Other than something like that happening I don't really see how my employer would find out?


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[TradeSmart]

To be honest, I don't if anyone would contact your employer. Other posters on here should be able to help you with that. Or speak to an accountant.

If I am honest though, I think you're skating on very thin ice competing with your employer. If they become aware of your website through whichever means, all they have to do is check who owns it and it will come back to you.

 

[Davek0974]

3) if the site takes off and I have to register for vat/pay tax etc how would I pay this/calculate what I owe in addition to my standard full-time salary?

I run a micro business as well as have a full time job and as far as i know / do, you have to account for all your income, you need to be registered as self employed and do a tax return each year showing tax paid in main income and money from own business etc.

4) how long could the site trade in its "testing" phase before I would have to inform the tax office/register a company?

I'm not sure there is a "testing phase", you need to be registered self employed before the first sales invoice is produced on your own company I think.

As for going into direct competition with your employer, that stinks I'm afraid, just morally wrong. The least you could do is to leave and then start up on your own, but even in my case I have a time limit clause for activities that could be construed as direct competition, before which I can not start to do so, check your contract.

I'm in no way suggesting this but if it was discovered that you were in direct competition and selling the same product, I would expect to find myself under very heavy scrutiny for missing / mislaid stock etc.

 

[Paul Norman]

I think most competent employers, if they discovered you were competing in any way would see that as a conflict of interest and that is likely to result in instant dismissal.

Beyond that, which is probably in itself undesirable, there is not much they would probably do.

 

[toddmeister]

I agree it would be morally wrong if I was to pursue my employers existing customers but that would not be the case.
My employer sells to local contractors only from our trade counter/warehouse. It has no online presence. The product range I would be selling would be aimed more at the public and purely online and items would be mainly sent direct from supplier to the customer.

Technically I could be classed as in competition but only based on the fact I would be selling one small range out of many stocked by my employer, not based on the fact that I would be trying to sell to any of their customers


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[Mitch3473]

If you're still not convinced with the info on here, ask your boss.

 

[sirearl]

.

As for going into direct competition with your employer, that stinks I'm afraid, just morally wrong. .

Whats morals got to do with business.

In any case most business's I suspect start by being in competition with employers current or ex.

 

[SwindonSteve]

Whats morals got to do with business.

In any case most business's I suspect start by being in competition with employers current or ex.

Congratulations!

That's the first post you have ever made that I agree with!

With regards to the OP, morally, the self righteous amongst us may rail against you with furious anger. Tell them to **** off.

Your employer will only have a problem with what you do if it directly impacts on their business.

A cheeky little sideline, as his lordship aforementioned that is off to the side could well be your saving grace but only if it grows too big.

If it impacts them enough they will obviously sack you, but by the time they start bitching about it you could probably tell them to do one anyway. If you play it right of course.

 

[toddmeister]

With regards to the OP, morally, the self righteous amongst us may rail against you with furious anger. Tell them to **** off.

Your employer will only have a problem with what you do if it directly impacts on their business.
.

That's what I was trying to get at above. I would not be targeting or approaching any of my current customers as the product I'm looking at pushing is a tiny part of my employers business and my site would have no impact at all on their sales. My target customer base would be national purely online sales rather than my employers regional, over the counter customers. In fact depending on which suppliers I deal with my site would almost be a dropshipping operation with me just pushing the site and placing orders on suppliers. Again totally separate from my daily job.

I really cant see what the moral issue is when I have no intention of intentionally targeting my employers business.

Thanks for the replies

 

[paulears]

Many years ago, my employer made it very clear to me that me hiring out equipment to my own clients was not acceptable. My equipment was quite different from my employers, but they asked me to choose, and I did - I became self-employed.

As for the earlier 'testing phase' there's no such thing. You are in business from the point you take your first money and provide a receipt.

 

[sirearl]

Congratulations!

That's the first post you have ever made that I agree with!

.

Enlightenment comes to most given enough time.

 

[Davek0974]

That's what I was trying to get at above. I would not be targeting or approaching any of my current customers as the product I'm looking at pushing is a tiny part of my employers business and my site would have no impact at all on their sales. My target customer base would be national purely online sales rather than my employers regional, over the counter customers. In fact depending on which suppliers I deal with my site would almost be a dropshipping operation with me just pushing the site and placing orders on suppliers. Again totally separate from my daily job.

I really cant see what the moral issue is when I have no intention of intentionally targeting my employers business.

Thanks for the replies

Thats different then, but not how i read and replied to the earlier post.

 

[Chris Ashdown]

How about talking to your boss and proposing a 50% share in the e-commerce site, and with his help you can offer the whole range and also get his trade discounts

 

[obscure]

Morals are irrelevant. What you have to watch out for are the law and hurt feelings. If your boss finds out you set up in business while working for them and feels (rightly or wrongly) that you did so in competition then they could sue you just to be mean. I have seen this happen and it cost the newco hundreds of quid in lawyers fees just to get their former employer to go away.

 

[Latebloomer]

Please don't do this behind their back. You might end up losing your business and your own job. Frankly I have seen this happen before with a friend of mine...lost everything including respect of his colleagues.

 

[GraemeL]

Your business name and address would be on your website, that's a legal requirement.

I am not clear if you can be both employed and self employed as far as PAYE is concerned. If the requirement of having your own business is that you have to have a self employed status, then PAYE details would change when you tell HMRC you have your own business. As your current employer pays a salary and therefore needs your PAYE details, they would be notified.

Another forum member will have come across this employment issue before, I am sure. If not, post a question on the HR forum.

However, if I was your boss and found you out, you would not have a leg to stand on.

 

[Simon.P]

I am not clear if you can be both employed and self employed as far as PAYE is concerned.

Hi,
I have been employed and self-employed concurrently - all HMRC are interested in is you pay them any money owed.
I don't believe there is any notification to the employer as its a separate issue. As for the PAYE code - this is for the employment purposes. The self-assessment form deals with any money owed through self-employment.
This was several years ago, so not sure if it still applies.

OP - if you call HMRC they will tell you.

Cheers
H

 

[Urban Publications]

Hi

The employer doesnt need to know, have you got friends/partner who you could trust, get them to register the domain etc etc then when the business takes off change the names, you could even hide your whois data at an extra cost, so no one need know.

Registering the business to HMRC, this is a new business all you have to do is tell HMRC that you are trading, you will not hear off them until you do your returns they certainly dont start making your current employer aware, like mentioned all HMRC want is a percentage of the money you made...talk to the tax office they will gladly tell you how they intend to take more of your hard earned cash

You also need to consider that the site when live is not going to be an overnight success, by the time your current employer finds the site you may have been trading 2 years and left because you can survive on your own two feet...believe me you are not going to make money straight away and it may be mths before you start getting regular sales

Where I see problems
Firstly Dropshipping,, do your homework and pay attention to the returns section of their T&C's, plenty of info on here regarding DS but do not go in with your eyes closed

Phone calls, lets say your site gets busy quite quickly, who is handling the calls, answering any calls within your current employers establishment could get uncomfortable.

VAT
I would of thought registering for VAT to be a must, will trade people bother with you if they know they wouldnt be able to claim their VAT back, and this is where the current employer could easily find you through your VAT number, unless of course you get a silent partner that registers all these details for you, with your name kept out of the picture.

I was also thinking along the lines of what someone else mentioned on here, why dont you build a site put a sample of your employers products on and approach them with a plan, dont go in with nothing but an idea, they might do to you what you are trying to do to them and backstab you, if they say its not in their interest to go online then ask the question if they mind you moonlighting, make sure you mention you will buy all your stock from them at trade rates, at least then all the cards are on the table, if they mind then get a silent/ghost partner, if they agree get your finger out and get the site built.

 

[toddmeister]

Thanks again for all the replies.

I found a link to a site from a google search which seemed to answer a lot of my "will they find out" questions but I cant post the link here until I reach 30 posts.

I also had a read through my employee handbook and it basically says if I want to do any additional employment I must first seek approval from them. I have no intention of doing that so it's obviously down to me to weigh up the risks of being found out. IMO the link between the two would be so slim that it would be highly unlikely that they would ever know about my site (I already own a couple of personal sites with Whois protection etc.) at least until if and when the site started to make some decent money, enough to warrant tax code changes?
That said, it did get me thinking. Would it be any "less legal" if I were to register a business in my wife's name, even if it were me doing the actual "work". She works part time (20hrs) per week so any of "her" additional income would obviously have to be accounted for.

 

[Chris Ashdown]

It's illegal to be a shadow director

Its also silly asking this forum for mainly business owners and managers for help in screwing another owner

Presumably your also stealing most of your contacts and what sells information from your bosses company

 

[beasty]

MORALISTIC VIEW

You are competing with your employer, you are limiting what he might do in terms of expansion (perhaps he is about to diversify) you heard this and thought he still has not done it, I will do it. As soon as he discovers your business and he will, you are fired.

FATALISTIC VIEW

You are caught, you are not a limited company, he alleges you have taken company info and planning to set up a business to rival his, whilst taking a salary all behind his back, sues you for the perceived loss to his businesses earning in a court, you are not a ltd, you have to sell your house.

REALISTIC VIEW

The vast majority will just do this, if you are not directly competing, make it a success fast then quit, do not make it a success then quit and think of the next plan to become your own boss.

Nothing ever happens by thinking about it, I know which one I would do, you can read about 100 entrepreneurs and read about 100 people talking about risks, challenges and winging it, it is what separates true entrepreneurs from the rest, willing to take risks and fail and then do it again until they are a success. If you see something you can do better, do it!

 

[Urban Publications]

It's illegal to be a shadow director

He didnt say he was going to register as a ltd, if he wants his misses to call HMRC and say she is trading then there is nothing wrong with this, she can sit back and let him do all the work, as long as she makes sure she gets the returns in then not a problem. Its certainly not illegal for him to work for free

Presumably your also stealing most of your contacts and what sells information from your bosses company

It doesnt take much ground work to find out what sells to electrical trades people, nor does it take much to find suppliers. stealing the customer base is a different kettle of fish and is taking berties he will deserve all he gets if he does rip the employers DB of contacts/buyers

The OP has not really gone into depth about his current employers business model, nor has he mentioned if the current employer has online presence, if the current employer is happy just to sell to "drop in" local trade and the OP is selling nationally online then its two different models.

Morals in business, is there such a thing, I would put my house on there being more successful immoral business people than "Moral Dons", its money not morals that feed my kids, pay my mortgage and make this earth spin.

People keep talking about legal action, if it's his misses that sets up the business no one can take anyone to court, the OP's name is not attached or being paid a wage by his misses company...Conflict of interest is about as far as it gets

 

[Newchodge]

Is there anyting in your employee handbook about a restrictive covenant? Not just you cannot do outside work without permission, but also you cannot, for a period of x months after leaving work in a similar industry, ealing with similar customers etc. If there isn't, you are entitled to do what you wish, although you can be dismissed for breaching the rule about additional employment.

If you do this as a sole trader you need to register as self employed as soon as you start trading - ie accept your first order. HMRC will not contact your employer. You will need to complete a tax self assessment every year, declaring your earned income and your self employed profit.

If you register a limited company, and you are a director, your name and address will be publicly available and your employer may find you. You can be an employee of the ltd company and pay tax through PAYE or just a shareholder and get your money through dividends.

 

[toddmeister]

Its also silly asking this forum for mainly business owners and managers for help in screwing another owner

Presumably your also stealing most of your contacts and what sells information from your bosses company

Well apologies for my, ahem, "silly" thread but isn't that what forums like this are for? To seek genuine advice and help? Or are non-business owners not welcome here in your view? How exactly am I asking for help in "screwing" anyone? As I've pointed out (more than once) in my posts above, I would be targeting a completely different customer base to my employer and have no intention of "stealing" anything.
By the way, you presume wrong. But whilst we're making these presumptions, I guess as you don't know me then I can only presume you are judging me based on your own standards? Although that's the problem with making presumptions isn't it, they are often wrong.

To everyone else thank you again for your constructive posts, it's much appreciated. I guess I should explain a little more about the structure of my employers business in the hope that it will clear up the competition issue.
I actually work for a group which owns multiple companies (around 56 I believe) under its main banner. Last year, as a group it turned over £1.8billion. The electrical side of this business is relatively new and has no online presence. The branch which I work for sells almost entirely to contractors/trade customers in a specific catchment area so they are our "bread and butter" if you like. The product range which I would like to sell through my site is a very small, almost insignificant part of our branches sales as the products are not aimed at contractors or trade customers. We only really have the products on display in our counter/showroom for the very few cash/public customers which come to our counter.
So basically my site would be selling products to the public, not electrical contractors (our bread and butter) and sales would be purely online through the site and certainly not to any of my existing trade customers. So in reality my site would be no competition to my current employer. I would hope most will be able to take my word for that without making assumptions.

In answer to the question from Newchodge regarding any restrictive covenant in my contract. No there is nothing. In fact in my entire employee handbook there is only one small paragraph relating to additional employment which simply states I must seek prior permission before undertaking any. Nothing more than that but I guess there's no real need for any. I can't work elsewhere without asking,simple as that. I am already aware of that and it's down to my judgement as to whether I feel its worth the risk to pursue my site any further.

Thanks again

 

[Chris Ashdown]

I am sorry I offended you, my meaning was more of gaining information on products and suppliers to the owners disadvantage

Most people in your position gain experience over the years working with a company and the leave to start up on their own, the same outcome but is not working behind someones back whilst they are paying you

 

[toddmeister]

thank you, appreciated

 

[Mobile & Tablet Repairs]

In circumstances like these i always try to fly below the radar. Have a none assuming business name for it but use a trade name to cover it.
Keep your name OFF the site and try not to let Google or other search listings show up in the rankings with that business associated with your name.
True some employers do not like you running your own business while your working for them. However as mentioned above your business is a conflict of interest with your current employer. So i can see them asking you to cease trading activities or asking you to leave. I would start slow though to begin with and try to keep out of your current employers market (Ie dont advertise where they do if at all possible). Eitherway its a tough one.

 

[CompuGlobal-Hyper-MegaNet]

It's a bit of a strange one - if you sold a few items via eBay they probably wouldn't bat an eyelid.
I would say that even if you cover all your tracks, you may slip up (someone comes to your house after a beer and sees your leaflets and envelopes), and when you do, it is highly likely they will fire you.
If the website generates £100 profit a month and you are out of work for a month if you got sacked, losing ~£2,000, then that would mean you'd have to run that site for almost 2 years just to cover that.

I'm in a similar position. I registered my website in my name and then my company was registered in my name too. This means I have to tread carefully as I have similar clauses in my contract (although I'm setting up in a completely different industry). I have had to delay trading indefinitely as although I can hide certain things like domain name, nothing can protect you when you turn up at someone's house and find out it's your senior manager!

The big question is how much do you value your job (are there other jobs you can go straight into? Do you have lots of financial dependants and not much of a buffer to cover bills? Is it a great place to work at?) and how valuable is this business idea (if it just gives pocket change then is it really worth risking the day job, or if it's going to grow so big in 6 months that you can jump ship, it may be worth the risk).