When you Want to Leave a Company to Start your Wellness Business
In a recent webinar I taught to nutrition professionals getting ready to start their private practice, I had an excellent question that I thought I’d answer. The dietitian wanted to start her own business, but wasn’t sure how she could do that while still working in her job.
Not only should you be clear what you can and cannot do, when getting ready to quit your job and start your business, you also want to start identifying early on, what type of business structure you want to start with. And know that if you start as a sole proprietorship, you can always expand, later.
Is There an Employee Non-Compete Clause?
The first thing to do is take a look at your employment contract. Everyone has one; sometimes the biggest challenge is to FIND it!
Review your employee contract in order to see if there are any non-compete, covenant not to compete and non-moonlighting clauses in the contract. You also need to review the contract to see if there is a particular time frame on it, so you don’t break the contract by leaving before the contract is up.
As key employees, the concern that an employer may have is the information these employees take away with them, such as trade secrets that provide the employer with a competitive advantage. As a result, this often is why there is a non-compete clause for key employees.
Once you have ruled out a time frame and any non-compete issues you must pay attention to, then address any non-moonlighting clauses. These can also apply to skilled employees, particularly like dietitians, who usually can quit their jobs at any time, which is known as ‘at will’ employees, but can still apply to all employees. Non-moonlighting clauses mean you cannot work on or in another job of any kind even after-hours, when working for this employer.
Recruitment Rules When Leaving your Employer
Another issue to pay attention to while working is not recruiting other employees. You cannot ask people you work with to join you. What you can do, however, is give them contact information and tell them they can contact you once you have the company up and running.
Sure, you may not have even THOUGHT of that, but on the other hand, there might be another dietitian, or a different health practitioner, who you would LOVE to work with, on your own.
Decide on Your Business Structure Early
As far as the business structure to choose, meet with an attorney to discuss the pros and cons of each structure. I have previously written about the different structures.
Choosing the structure will help determine what potential financial support you can strive for in the future. If you don’t plan to grow big and are determined you don’t want large financial support, then choosing an LLC or an S Corporation would be adequate.
The advantage of an LLC is it can be taxed either as a sole proprietorship or as a corporation. It also is easier to convert to an S or C Corp later. The disadvantage of an S corporation is you would not be able to get VC funding because of the limitation of no more than 100 shareholders. Another limitation of an S corporation is there is only one type of shares, which could limit appeal to outside investors as well as some key employees who may come on board in the future.
Splitting the Business Pie
This one final piece has been the cause of dissolution’s of way too many partnerships. As a consequence, I highly suggest you take this to heart.
All partners bring something different to the venture, and there needs to be at least one person who would make the final decision in the case of disagreements. Therefore, splitting the pie evenly is never recommended. Different people bring varying amounts of knowledge, experience, time and money into a venture. Different people will spend differing amounts of time and effort on the business. Plus, there needs to be some of the ownership set aside for future investors as well as future partners and employees.
It’s an exciting time, getting ready to start a new business. And I believe that ANYONE can do it! But to ensure the best success possible, it’s important to take these very early points into account.
More questions about starting a business? Let me know in the comments below!
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Margie
Marjorie Geiser, MBA, RD, BCC