Can I start a startup while employed full time?
By SuLe · Updated 3 May 2026
Yes — nothing in UK law stops an employee from forming a company, but your employment contract and your duty of fidelity set the real limits. Copyright in work created in the course of your employment belongs to your employer, wide IP clauses can reach side projects, and competing with your employer while still employed is the classic trap.
Key facts
- Copyright in works made in the course of employment belongs to the employer — s.11(2), Copyright, Designs and Patents Act 1988.
- Inventions made in the course of an employee's normal duties belong to the employer — s.39, Patents Act 1977.
- Wide employment-contract IP clauses can catch side projects built in your own time on your own equipment.
- Employees owe a duty of fidelity while employed; competing with your employer before resigning is the classic breach.
- Anyone aged 16 or over can be the sole director and shareholder of a UK limited company — employment does not bar it.
Is it legal to form a company while employed?
Yes. UK law lets one person aged 16 or over be the sole director and sole shareholder of a private limited company, and no statute says you cannot hold a job at the same time.
The constraints are contractual and duty-based, not statutory. The real question is not "may I incorporate?" but "what did I promise my employer?" — so read your employment contract before you write a line of code, and keep a copy of the version you checked.
Who owns what I build while employed?
Two statutory defaults do the heavy lifting. Copyright in works you create "in the course of employment" belongs to your employer under s.11(2) of the Copyright, Designs and Patents Act 1988, and inventions made in the course of your normal duties belong to your employer under s.39 of the Patents Act 1977.
Many contracts then go further. A wide IP clause can claim work "relating to" the employer's business even if you built it at home, at the weekend, on your own laptop.
So ownership sits in two places — statute and contract — and the contract is usually the stricter one. The same rules will matter again once you are the employer: see Who owns the IP my employees and contractors create?
What can my employment contract stop me doing?
Four clause families do most of the damage, and you should read each one before building anything.
| Clause | What it does | What to check |
|---|---|---|
| IP assignment | Claims work created in the course of employment — sometimes anything "related to" the employer's business | How wide is "related"? Does it reach own-time, own-kit work? |
| Outside business interests | Requires disclosure of, or consent for, other roles and directorships | Whether incorporating or serving as a director needs written consent |
| Non-compete and non-solicit | Restricts competing activity and approaching clients or colleagues, during and sometimes after employment | Scope, duration, territory — and whether your startup actually competes |
| Confidentiality | Protects employer information during and after employment | Keep employer code, data and client lists entirely out of the startup |
If your startup is in a different sector from your employer, these clauses usually leave you room. If it overlaps, get advice before you resign — and check Are non-compete clauses enforceable in the UK? before assuming a restriction falls away.
What duties do I owe even without those clauses?
Every employee owes an implied duty of fidelity — loyalty to the employer while the employment lasts. Taking preparatory steps in your own time, like incorporating or building a prototype, is generally permissible; actually trading in competition, diverting your employer's clients or recruiting its staff while still employed is the classic breach.
If you are also a director of your employer, you owe fiduciary duties on top, and the line moves against you. Fiduciaries must avoid conflicts and may need to disclose their plans — resign cleanly before the startup becomes a competing interest.
How do I start safely while employed?
Work the sequence: read the contract, keep the project off employer time, equipment and data, and get written consent where the contract requires disclosure. Written consent beats a corridor conversation — it is the document you will show investors.
When the project becomes real, incorporate and sign a written assignment of your pre-incorporation IP into the company. That gives the startup a clean chain of title from day one, which due diligence will test later.
Worked example
Tomasz, a senior data engineer at a retail bank on £72,000, wants to build scheduling software for hair salons. His contract assigns the bank any IP "relating to or capable of use in" its business and requires consent for outside directorships — wide enough to argue about, so he emails HR and gets written confirmation that salon software falls outside his role.
He builds evenings-only on his own laptop, incorporates Pomelo Bookings Ltd with 100 ordinary £1 shares (£100), and assigns his prototype to the company. With consent on file he starts charging customers, and resigns eight months later when revenue passes £4,000 a month — leaving a clean IP chain for future investors.
Where founders go wrong
Building on the work laptop or in work hours
— it hands your employer the course-of-employment argument and poisons the IP chain.Assuming "my own time means my own IP"
— the statutes are only the default; a wide contract clause can reach further.Recruiting colleagues or pitching your employer's clients before resigning
— that is where fidelity claims actually get brought.Staying silent when the contract requires disclosure
— the silence itself becomes the breach, whatever the startup does.
Related questions
Who owns the code I write in the evenings?
It depends on your contract more than the statute. Copyright in work made in the course of employment is your employer's under s.11(2) CDPA 1988, and wide contract clauses can reach related side projects even in your own time. Unrelated work on your own kit is usually yours — check the wording. [More: Who owns the IP my employees and contractors create?]
Can my employer stop my startup with a non-compete clause?
Only if the clause is no wider than reasonably necessary to protect a legitimate business interest — courts refuse to enforce restraints that go further. A genuinely competing startup operating in your old role's territory is at risk; an unrelated venture rarely is. [More: Are non-compete clauses enforceable in the UK?]
Do I have to tell my employer about my startup?
There is no general legal duty to volunteer it, but many contracts require disclosure of outside business interests or consent before you take a directorship. If yours does, silence is itself a breach — and senior or fiduciary employees are held to a higher standard. Check before incorporating.
How do I move what I have built into the company?
By a written IP assignment from you personally to the company, ideally signed at incorporation. Until then the code and brand are your personal property — a gap investors will spot. Assign before others contribute, or ownership fragments across people who may later leave. [More: How do I transfer pre-incorporation IP into my company?]
The riskiest period is the overlap — the months when you are still employed but the startup is becoming real, and one wide clause can decide who owns your product. A SuLe solicitor can read your contract, tell you what it actually catches and script a clean exit. Book a free 15-minute consultation about your setup
Keep reading: What legal documents does a UK startup actually need? · Can I be the sole director and shareholder of my startup? · How many shares should I issue when incorporating a UK startup? · Should I use model articles or bespoke articles of association? · What is a founders' agreement and do we need one? · Who owns the IP my employees and contractors create?
Primary sources: Companies Act 2006 · Copyright, Designs and Patents Act 1988 · Patents Act 1977
