You can usually start a company while employed, but first read three documents: your employer’s intellectual property and invention assignment terms, its conflict-of-interest and outside-activity rules, and any confidentiality or noncompete agreement you signed. Intellectual property means rights in inventions and other creations; an invention assignment transfers ownership rights. Disclose the venture early and keep company work separate from employer time, equipment and confidential information. Get your employer’s written position on who owns the technology before you raise money.
Conflict-of-interest and outside-activity rules
A conflict of interest arises when personal financial interests could affect professional judgment. Universities generally require faculty and staff to disclose outside consulting, board roles and equity, meaning ownership in a company. They may limit outside work and require a management plan when university research or students could benefit a researcher’s company.
Public Health Service (PHS) rules, including those covering NIH-funded research, require investigators to disclose significant financial interests to their institution under 42 CFR Part 50, Subpart F. For a privately held company, any equity counts, as does more than $5,000 in payments from the company over the previous 12 months, so a founding stake in a startup built on your research is normally disclosable. The institution determines whether the interest creates a conflict and how to manage it; disclosure alone is not approval.
Corporate employers have their own outside-activity and moonlighting policies, which govern work alongside your job. Disclose before forming the company or accepting equity, and ask which approvals your proposed role requires. Verify current federal requirements and institutional procedures with the official source and your institution.
Who owns what you invent on the job
University policies and corporate invention assignment agreements usually give employers rights to inventions made within your job’s scope or with employer resources. Working at home does not settle ownership. The agreement’s wording, your duties and applicable state law matter; how technology transfer works explains institutional ownership and commercialization.
California Labor Code § 2870 limits assignment of inventions developed entirely on personal time without employer equipment, supplies, facilities or trade secret information. Exceptions include inventions related to the employer’s business or actual or demonstrably anticipated research or development, or resulting from work performed for the employer.
Several other states, including Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah and Washington, have broadly similar statutes, and New York added Labor Law § 203-f in September 2023. These protections do not establish that your particular invention belongs to you.
Check these provisions before describing technology to prospective co-founders or investors:
- The definition of “invention,” including software, methods and improvements.
- Language connecting inventions to the employer’s business or research.
- A prior-inventions list documenting work created before employment.
- Assignment language describing what rights transfer and when.
- Post-employment clauses covering continuing obligations after departure.
Have an employment or intellectual property attorney review the agreement and current state law. This guide provides information, not legal advice.
Using university equipment and students
Company use of university labs, shared research facilities, software or funds usually requires a formal agreement. This might cover sponsored research, meaning company-supported university research, facility use or specific services. Mixing company and university work can create competing ownership claims.
Keep separate notebooks, accounts and devices, with records showing where work occurred and which resources supported it. Permission to use equipment does not establish permission to commercialize an invention; licensing university technology addresses that separate agreement.
Involving students or postdocs you supervise requires a conflict management plan. Their academic progress must not depend on company work. Address supervision, voluntary participation, compensation, publication and access to independent academic advice before assigning tasks.
Leaves, part-time roles and timing the jump
Your role can change as the company develops. Compare the available arrangements against employer policy and the work the business actually needs.
| Arrangement | Useful when | Check first |
|---|---|---|
| Stay employed; advise or work part time | The company can progress within approved limits | Time limits, ownership and outside-role approval |
| Take an allowed leave | Focused company work needs a defined trial period | Return terms, benefits and continuing obligations |
| Leave employment | The business needs your sustained attention | Income, insurance and transition responsibilities |
Signals that it may be time to move include a signed license or option on the technology, customer evidence such as paid pilots, a first grant or seed investment that can pay salaries, and a co-founder able to lead full time in the meantime.
SBIR principal investigators, the researchers responsible for projects, generally must be primarily employed by the small business at award and during the project; check the SBIR and STTR funding guide and verify current agency requirements.
Plan benefits, health insurance and income before changing roles. International researchers should consult their international office or an immigration attorney before any change affecting visa status. If you lead federal awards, discuss grant obligations and research continuity with the institution’s grants office.
Noncompetes and confidentiality
A noncompete restricts certain competing work. There is no general federal ban on noncompete agreements; enforceability depends on state law. Ask an employment attorney to assess your agreement against current law before accepting a competing role.
Confidentiality obligations and trade-secret law apply everywhere. A trade secret is confidential business information protected for its commercial value. Never take employer files, data or code; if the company needs something the employer owns, get written permission first.
Checklist before you start
Record the relevant policy, responsible office and written decision for each item. Revisit approvals when your role, funding or use of institutional resources changes.
| Item | Why it matters | Who to ask |
|---|---|---|
| Read IP policy or invention agreement | Identifies ownership obligations | Employment or IP attorney |
| List prior inventions | Documents pre-existing work | Attorney and employer’s designated office |
| Disclose outside activity and equity | Starts review before commitments | Compliance office or human resources |
| Confirm time limits | Sets workable boundaries | Department leadership or human resources |
| Separate equipment, accounts and email | Documents company resources and work | IT and facilities offices |
| Obtain written ownership position or license | Clarifies rights before fundraising | Technology transfer office or employer counsel |
| Arrange conflict management if needed | Protects research and supervised trainees | Conflict-of-interest office |
| Check grant and visa implications | Identifies restrictions on changing roles | Grants office, international office, immigration attorney |
| Plan benefits and income | Tests whether the transition is affordable | Benefits administrator and personal budget records |
Frequently Asked Questions
Can I start a company without quitting my job?
Often, provided your employer permits the proposed activities. Establish an approved role and schedule before committing to company responsibilities.
Do I own inventions I develop at home?
Location alone does not determine ownership. Your duties, employment agreement, resources used and state law need review by an employment or intellectual property attorney.
Can students work for my startup?
Seek institutional review before involving anyone you supervise. A written plan should protect academic choices and explain how company participation relates to university responsibilities.
Should I resign before applying for a grant?
Check the funding opportunity’s employment requirements before choosing a resignation date. Coordinate any change with the grants office and confirm requirements directly with the funding agency.
Can I use code I wrote for my employer?
Writing code does not establish personal ownership or permission to reuse it. Have counsel clarify rights and obtain written authorization before transferring or using employer code.