Asked in Business Law and Employment Law for New York

Q: Can I own and work for two competing business at the same time?

I own 20% of a successful business, and now wish to open another business that competes, but run it in my style, and attract a different audience than our current business has.

I have no desire to leave my current business. I worked very hard to get it where it is, and have a nice salary.

There are no trade secrets, no client lists I'm interested in using, no proprietary technology, and I've never signed a non-compete agreement. Of course, I would never work on my new business during work hours of the other business. Still, I don't plan on telling anyone in the existing business about it, but I'm sure it will become noticed quickly.

Are there any legal issues with this approach? Do I have to give up my existing position in the existing company before beginning this competitor that I'd like to build, or make any disclosures whatsoever? I suspect some existing partners will be sad, or disappointed, or angry. But for them, is there any recourse?

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3 Lawyer Answers
Answered
  • New York, NY
  • Licensed in New York

A: Unless there is an agreement requiring particular work time you can do what you want.

Answered
  • Tarrytown, NY
  • Licensed in New York

A: The other lawyer is correct. We are still free to work where we choose to work. Of course if you are licensed or regulated as a "professional" then you would have ethics codes, state or local laws to comply with. Franchise agreements would probably stop you. If you hold the money for the business you may / probably would be a fiduciary with express or implied duties. If employees leave the other partners may follow you and open their own businesses. Otherwise their problems may just be "personal problems."

Answered
  • Montclair, NJ
  • Licensed in New York

A: The other lawyer's are for the most part correct, however since you are a co-owner in a closely held business an argument can be made that the new opportunity you are embarking on is really an opportunity for the business you are presently in (for background see the following: https://en.wikipedia.org/wiki/Corporate_opportunity), in which case that can arguably be a breach of your fiduciary duties to the other owners (google "fiduciary duties in closely held businesses" and see all of the results in fiduciary litigation cases).

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