Quitting Your Job and Starting a Business in the Same Industry

by Beth Rifkin

2 min read

If you’re looking to venture out and start your own business, it makes sense to do it in the industry where you already work. After all, how else can you put your experience and knowledge to work? While being your own boss is certainly an attractive possibility, there are both risks and benefits to starting a business in the same industry as your former employer.

Duty of Loyalty

In Canada, labour relations are mostly a matter of provincial legislation. There is some variation from province to province, but almost all laws include some form of “duty of loyalty” that employees owe their former employers after they have left their job. Some elements are obvious: You can’t leave your job with proprietary information, such as a client list or blueprints for a product. Other aspects of the duty of loyalty are more subtle. For example, are you allowed to inform suppliers or clients that you know personally about your new business? Is there a waiting period? Can you locate your business in the same geographical area as your former employer? You can find answers to these questions in your written employment contract. Even if you don’t remember it, you may have signed an agreement that contains a non-competition or non-solicitation clause, so be sure to check before you start your business. If you were a partner in the business, you may have signed a shareholders agreement. That said, Canadian courts have often invalidated such clauses when they are unreasonable, because the right to earn a living is a fundamental one. Each case is different, so seek professional advice if you are unsure about your own situation.

Intellectual Property

You also have to be careful not to infringe on your former employer’s intellectual property rights. There may be patents, copyrights, and trademarks that have been protected by your previous employer. Even industrial designs can be protected in Canada. The Canadian Industrial Property Office is the official government agency that registers intellectual property. You can use CIPO’s free searchable databases to find out if there are issues with the way you plan to set up your business. As far as intellectual property is concerned, there is a distinct advantage in starting your business in your field of employment: No one can stop you from using what you already know. Essentially, if it’s in your head, it’s yours. If you have several years of experience and know the inner workings of an industry, you should be able to set yourself up from scratch. In other words, your own intellectual property is also very valuable. In the end, if you work diligently to ensure that you are proceeding in a legal manner, the benefits of being your own boss may quickly outweigh the risks of continuing to work in the same industry as your old job.

References & Resources

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