What is a conflict of interest when starting a business?

When can a conflict of interest arise?

Certain situations are more likely to create potential conflicts, such as: 

• Starting a business that competes with your employer.
• Using your employer's time, equipment, or confidential information.
• Serving customers who also do business with your employer.
• Doing business with a company you manage or oversee.
• Having financial interests that influence business decisions.
• Owning multiple businesses with competing interests.

Identifying potential conflicts early can help reduce legal and business risks.

What should you review before launching your business?

Before starting a business, it can help to understand any obligations that could affect your plans. Consider reviewing:

• Employment agreements or independent contractor agreements.
• Non-compete, non-solicitation, or confidentiality provisions.
• Company conflict of interest policies.
• Partnership, shareholder, or operating agreements.
• Industry rules or professional ethics requirements.
• Existing business relationships that could create competing interests.

Understanding these obligations can help you identify potential issues before your business grows. Though it is important to note that a potential conflict of interest does not automatically prohibit someone from starting or operating a side business. The key issues are whether the new venture conflicts with existing contractual, fiduciary, ethical, or legal obligations, and whether any potential conflicts can be appropriately managed or disclosed.

What to do next…

1. Review any agreements or workplace policies that apply to you.
2. Identify relationships that could create competing interests.
3. Consider whether your new business overlaps with your current responsibilities.
4. Address any potential conflicts before expanding your business activities.

What to consider in your specific situation

• Your employment status and any contractual restrictions.
• The type of business you plan to start.
• Whether your business competes with your employer or another business.
• Confidential information or business resources you have access to.
• Industry-specific laws, regulations, or ethical rules.
• The nature of your relationships with customers, vendors, or business partners.

Since every situation is different, consider getting more information through Rocket Copilot or an attorney review to move forward more confidently.