Start a business alongside fulltime corporate slavery
Hi, I am currently working as an SDE in India. I want to start a small business (online consultancy) with a friend which will require some legal stuff like GST and partnership firm/company registration in India.
For the initial days of the business, we will be working full time as well and will work on our business in our free time. If this scales well, we'll probably leave our jobs and work on the business full time.
Now, I have a few questions regarding this
- is it a case of moonlighting?
- What will happen if my employer gets to know this in the future?
- What are the legal implications in India for this?
- What are the workarounds for this?
I've seen many people selling some courses or having a restaurant or some small business along with full time employment. How do they manage to do so?
If employer comes to know, they can terminate you, if you are adding value to the org then it's their loss.
If your actions indirectly or directly affect your employer, you will be terminated with instant effect without severance.
No legal implications at all whatsoever.
Workaround is to stay in stealth.
For all the clients, Make sure you make them sign agreement that explicitly mentions you are a consultant to them. Paperwork is a must for legal hygiene, if ignored then it can really screw you.
Never ever use office issued equipments (phone, laptop, cables, etc) for your extra curriculars.
Try to avoid client interactions in office timings.
Great points
Okay a few points based on my experience:
-
DO NOT file for a partnership. If you're actually going ahead with company formation, where you're looking to raise capital, either create a Pvt Ltd. or go with a Denver listing, so that you can easily raise capital from investors (Indian and abroad)
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Based on point 1, if you're actually going ahead with company formation, leave your job and work on your startup full time. But if you're tinkering around with the idea, wait for a while till you atleast build an MVP. If going in that direction, there's no need to file for company formation. This is a technicality: if you're working on your startup project, you're not moonlighting. But if you're working on your formalised startup, it might lead to legal consequences (might!).
-
Have some optimism, bud! "If this scales well"? Founders and entrepreneurs are stupidly optimistic about their ideas. Stay grounded, but optimistic.
Hope this answers your questions. All the best!
Thanks for the points. We are actually planning to start off as a software agency and consultancy and we are not planning to raise any capital even in the near future as we want it to be cash flow positive from day 1 (day 1 is the day we get our first client).
Some folks suggested that we should file for a company/partnership firm so that it becomes easier to get contracts in India or else we'll just be treated as a freelancer.
Few follow-up questions:
- Should we start by creating a partnership firm and when we reach a certain revenue, we move to some tax free zones like Dubai?
- If we remain in stealth till we have our jobs and register a company firm in Dubai, do we still have the legal concerns that would otherwise be caused by registering in India? I know a few people working in FAANG and have their companies set up in Dubai, how do they manage to work without any legal implications?
- If we are a partnership firm in India and we do not draw the profits from the company till we are employed, decide to work only for clients who are in completely different industries as our employer and do not use any company equipment, do we still come under the legal implications?
- Do clients from US/Europe care if there's a company set up in India?
@Django @0case Request you to please clarify on the above points
- Don't form your company unless you guys have a client base, have enough revenue to quit and pursue it full time.
- If you're not planning to raise capital, then register in India itself, lesser complications. Yes, you'd have GST etc, but that's after you cross a certain revenue threshold. And by that time you can actually pursue this full time.
- instead of focusing on legalising your business, focus on building and starting up. Build a client base, cross the revenue threshold to then register a company. That's a much better approach than registering your company and then starting up.
- No, not really. I assumed you were building a product (B2C/SaaS), to raise capital. You just need to have international payment facilities, that's pretty much it.
Following similar footsteps, hoping to close my first client in next few days. Few questions from my side.
- Should I create a separate current account and get the payment there? or can use any other savings account?
- What are the tax implications if I sign the contract as Professional Consultant? Can I have salary income and claim 50% of consultant income as preemtive income as full time contractors do? Thanks
@Django
following
This is easier said than done. Have tried it. It's unbelievably stressful. The long hours will kill you. If you reduce the time spent on side business you cannot scale up. Without scaling up you won't have the confidence to quit your main job and focus on the side as full time.
Only option I have found is, focus on the side business untill it's feasibility can be established. Once that point is reached quit your full time job and get focussed. But the catch is there is no return journey. Once in you there is no exit.
If anyone has found any other way, please do share.