HELP - Start "sideline" business while FT employed

[Didka]

Hello - i have been thinking on starting a mini-business - selling a product online - more as a hobby for now - while keeping my actual job (totally different from each other).

now, i have a clause in my current contract saying that I need to work exclusively for the firm, unless I get a written consent in respect of my involvement in outside employment or business activities.

outside employment is clear, but what would you define as business activities?

If i want to set up a business i have normally two options - sole trader (self employed) or Director at LTD company. Believe self-trader is not in line with my contract - but how about Director?

I dont want to notify my company right now - it is still very early - thats why I want to check if being a Director in Ltd would break that clause in my current contract? I wont pay myself a salary - only a dividend

thanks for your help

 

[S2K]

It depended on the exact wording of the contract. If you are required to work exclusively, then iy doesn't matter whether you run the business as sole trader or limited company.

Are you allowed to run a business that's not in direct competition with your employer?

 

[Didka]

Thank you for the reply - i thought being a director wouldn't be considered employment/business activity

the wording is more or less what I have put in my previous post and thats the only restrictive paragraph - they dont mention anything about competition.

I am a bit confused because lets say I have a friend who says: I want to set up a company, I need funds - can you invest in my Ltd and in return you will be Director/shareholder?

in that case I wont have any real involvement besides giving the funds. So not sure why Director would be considered employment/business activity

not sure what any other options I have? any ideas? set up a company under my mom's name... cant think of anything else

 

[Mr D]

Have you thought of someone else as director and you as a major shareholder?

 

[Didka]

Haven't thought of that - but could be an option I guess! Who is the decision maker in that case? the Shareholder or the Director?
Who decides how much dividends you get paid, approves changes etc?

 

[S2K]

In the friend scenario you are an investor and this is not necessarily a commercial activity unless you are involved in the running of the business. What you want to do however is to "sell online" and this is a commercial activity and subsequently you are in business.

In the other scenario where a friend is shareholder and director... under the Companies Act the director is responsible for the production of the accounts, submission of returns, keeping accounting records and more importantly ensuring the company is run within the letter of law. The director would declare dividends. However, the directors can appoint somebody to run the daily activities of the business on their behalf.

 

[Ashley_Price]

Hi @Didka, welcome to UKBF!

To be honest, I think it's best all round if you speak with your employer so you know where you stand.

The last thing you want to do is try something and then find you've broken your contract of employment and they let you go.

The company may say "it's fine, go ahead" or they may say "no you can't do this", either way, you're then clear about it.

Are you willing to risk your job, based on what others tell you, compared to just double-checking with your employer?

 

[NCapital]

It seems to be common practice these days. Plenty of employers seem to put clauses in their contracts similar to what you've mentioned, but as far as I can tell, it's mostly to try and prevent them from learning their respective trade and then running off to start a competing business, potentially taking customers away from their employer.

I wouldn't go as far as telling you to ignore your contract, but think about how many people do a similar thing to what you're proposing - i.e. selling a few bits online. Some people sell their old items on eBay, and some even make a habit out of it. At what point is the line drawn between "making a few bucks on side", and , "operating another business entirely"? I've no idea.

 

[Dean Logan FCA]

Since 2016 UK limited companies have to register with Companies House 'persons with significant control' - who may or may not be shareholders or directors.

I advise a significant number of 'online traders' through my accountancy practice and would be pleased to offer free specific initial advice.

 

[DontAsk]

My contracts (US multi-nationals) have always been more restrictive on outside directorships than having second jobs.

 

[MyAccountantOnline]

Hello - i have been thinking on starting a mini-business - selling a product online - more as a hobby for now - while keeping my actual job (totally different from each other).

now, i have a clause in my current contract saying that I need to work exclusively for the firm, unless I get a written consent in respect of my involvement in outside employment or business activities.

outside employment is clear, but what would you define as business activities?

If i want to set up a business i have normally two options - sole trader (self employed) or Director at LTD company. Believe self-trader is not in line with my contract - but how about Director?

I dont want to notify my company right now - it is still very early - thats why I want to check if being a Director in Ltd would break that clause in my current contract? I wont pay myself a salary - only a dividend

thanks for your help

I think your contract will include you being a sole trader and trading via a limited company.

I look after the accounts and tax affairs for a lot of people who run a side line business whilst also being employed, and in my experience unless your are running a business which is in direct competition with your employers, or effecting your work, in my experience your employers are unlikely to object.