{"id":1351,"date":"2020-02-03T19:06:26","date_gmt":"2020-02-03T19:06:26","guid":{"rendered":"https:\/\/www.bfvlaw.com\/can-you-start-a-competing-business\/"},"modified":"2022-08-04T19:58:21","modified_gmt":"2022-08-04T19:58:21","slug":"can-you-start-a-competing-business","status":"publish","type":"post","link":"https:\/\/www.bfvlaw.com\/can-you-start-a-competing-business\/","title":{"rendered":"Can you Start a Competing Business?"},"content":{"rendered":"\r\n<p>Can you compete with your own company by starting a competing business? Some entrepreneurial mavens <a href=\"https:\/\/www.entrepreneur.com\/article\/235233\">argue<\/a> that competing with yourself is essential to innovation. But what are the legal consequences of doing so?\u00a0 Consider Laverne and Shirley, who each own an equal share of a successful business. Can Shirley start a competing business with other partners?\u00a0 It depends. What is Shirley\u2019s role in the business?\u00a0 Does she have a written contract with the company or with Laverne? The answers to these questions can make a big difference in determining Shirley\u2019s right to compete.\u00a0 \u00a0\u00a0<\/p>\r\n\r\n\r\n\r\n<p><strong>Role Within the Entity <\/strong><\/p>\r\n\r\n\r\n\r\n<p>If Shirley is merely a passive investor, she can probably compete with the business. But, if she holds a management role, she will generally be precluded from competing. With managerial and operational responsibility generally come fiduciary duties to act in the best interests of the business. If Shirley is also an employee, she may owe the business a <a href=\"https:\/\/www.bfvlaw.com\/georgia-court-of-appeals-affirms-judgment-against-former-employee-for-breaching-his-duty-of-loyalty\/\">duty of loyalty<\/a> that would prevent her from simultaneously owning or working in a competing business, depending on the duties and responsibilities of her employment.\u00a0\u00a0<\/p>\r\n\r\n\r\n\r\n<p><strong>Contractual Obligations <\/strong><\/p>\r\n\r\n\r\n\r\n<p>Often, written contracts specifically address to what extent members, managers, shareholders, officers, directors, and employees can participate in competing ventures.\u00a0 Some agreements expressly forbid any competition, even among mere passive investors.\u00a0 Other agreements expressly allow managers, officers, and directors to participate in a competitive endeavor, so long as it does not interfere with their managerial duties.\u00a0 Reading and understanding contracts that speak to these issues is vital in determining whether it is kosher to compete.\u00a0<\/p>\r\n\r\n\r\n\r\n<p><strong>Don\u2019t Use the Company\u2019s Resources to Compete It.<\/strong><\/p>\r\n\r\n\r\n\r\n<p>Under no circumstance may Shirley use the resources of the business she shares with Laverne to compete with that same business.\u00a0 Such resources would generally include capital, employees, data, or business processes for competitive purposes that do not benefit the business that owns that data.\u00a0 \u00a0<\/p>\r\n\r\n\r\n\r\n<p>Imagine for a moment that Shirley is both an officer and an employee of the company and that her employment agreement as well as the company\u2019s shareholder agreement expressly prohibits her from engaging in competing ventures.\u00a0 What happens if she competes anyway?\u00a0 Likely, Laverne will sue Shirley for breach of contract, breach of <a href=\"https:\/\/www.bfvlaw.com\/whats-the-statute-of-limitations-on-a-breach-of-fiduciary-duty-claim\/\">fiduciary duty<\/a>, or <a href=\"https:\/\/www.bfvlaw.com\/opportunity-knocks-but-for-whom-2\/\">usurpation of corporate opportunity<\/a>.\u00a0 But if instead, Shirley meets with experienced legal counsel, and carefully considers the implications of competing with her existing business, she may well avoid that unpleasantness.<\/p>\r\n\r\n\r\n\r\n<p>If you have questions about your rights or those of your business partner to participate in a competing venture, please let me know if I can help.\u00a0 \u00a0\u00a0\u00a0<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\">\r\n<div class=\"wp-block-embed__wrapper\">https:\/\/youtu.be\/9CkE7YiCY04<\/div>\r\n<\/figure>\r\n","protected":false},"excerpt":{"rendered":"<p>Can you compete with your own company by starting a competing business? Some entrepreneurial mavens argue that competing with yourself is essential to innovation. But what are the legal consequences of doing so?\u00a0 Consider Laverne and Shirley, who each own an equal share of a successful business. Can Shirley start a competing business with other [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":1352,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4,195,8],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Can you Start a Competing Business? - Berman Fink Van Horn P.C.<\/title>\n<meta name=\"description\" content=\"Can you compete with your own company and start a competing business? 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