I work full-time at an IT company and want to start a private limited company. Will there be any problem if I join a new organization in the future and they find out about it during background verification?
I want it registered in my name and don't want to involve any family members. I am okay with disclosing this to a new employer.
What should be the best approach? Can any HR professionals provide advice on this?
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1I want it registered in my name and don't want to involve any family members. I am okay with disclosing this to a new employer.
What should be the best approach? Can any HR professionals provide advice on this?
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Can You Start a Private Limited Company While Working Full-Time?
Yes, you can start a Private Limited Company while working full-time, but there are critical factors to consider, especially regarding employment contracts, legal compliance, and background verification.
📌 Key Considerations Before Registering a Private Limited Company
1️⃣ Check Your Current Employment Contract
🔹 Review your employment agreement to see if there are any clauses related to:
✅ Non-Compete Clause – Restricts working for or running a competing business
✅ Non-Solicitation Clause – Prevents hiring employees or clients from your employer
✅ Conflict of Interest Clause – Prohibits engagement in other businesses without approval
🔹 If such clauses exist, seek written approval from HR or legally navigate them.
2️⃣ Legal Aspects of Running a Private Limited Company While Employed
✅ Legally, there is no restriction on being a director or shareholder in a Private Limited Company.
✅ However, under Section 16(1)(b) of the Companies Act, 2013, you cannot be a whole-time director while holding a full-time job.
✅ You can register the company under your name, but if you don't actively manage daily operations, appointing a co-founder or director can help.
3️⃣ Background Verification & Future Job Prospects
✅ If you fully disclose this to a new employer, there should be no problem.
✅ HR verification checks generally focus on past employment, education, and criminal records.
✅ If the company is publicly registered, it may show up in MCA (Ministry of Corporate Affairs) records, which recruiters may check.
✅ Hiding this information could damage credibility, but disclosing it with a clear explanation shows professionalism.
📌 What's the Best Approach? (HR Perspective)
🔹 Option 1: Register the Company Under Your Name (With Proper Disclosures)
Suitable if your employment contract does not restrict external business ventures
Be transparent with your employer and future organizations
🔹 Option 2: Appoint a Co-Founder or Silent Director
If your employer has strict policies, you can register the company but appoint a director for operations
You will remain a shareholder and have control over decision-making
🔹 Option 3: Get Prior Approval from HR (Only if required as per your contract)
If policies require approval, get written consent from your employer before incorporating
📌 Final HR Advice
✔ Registering a company in your name is legally allowed, but ensure there's no conflict of interest
✔ Disclose it upfront to avoid background verification issues in future job opportunities
✔ If needed, take a legal consultation to avoid employment contract violations
From India, Gurugram
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Yes, you can start a Private Limited Company while working full-time, but there are critical factors to consider, especially regarding employment contracts, legal compliance, and background verification.
📌 Key Considerations Before Registering a Private Limited Company
1️⃣ Check Your Current Employment Contract
🔹 Review your employment agreement to see if there are any clauses related to:
✅ Non-Compete Clause – Restricts working for or running a competing business
✅ Non-Solicitation Clause – Prevents hiring employees or clients from your employer
✅ Conflict of Interest Clause – Prohibits engagement in other businesses without approval
🔹 If such clauses exist, seek written approval from HR or legally navigate them.
2️⃣ Legal Aspects of Running a Private Limited Company While Employed
✅ Legally, there is no restriction on being a director or shareholder in a Private Limited Company.
✅ However, under Section 16(1)(b) of the Companies Act, 2013, you cannot be a whole-time director while holding a full-time job.
✅ You can register the company under your name, but if you don't actively manage daily operations, appointing a co-founder or director can help.
3️⃣ Background Verification & Future Job Prospects
✅ If you fully disclose this to a new employer, there should be no problem.
✅ HR verification checks generally focus on past employment, education, and criminal records.
✅ If the company is publicly registered, it may show up in MCA (Ministry of Corporate Affairs) records, which recruiters may check.
✅ Hiding this information could damage credibility, but disclosing it with a clear explanation shows professionalism.
📌 What's the Best Approach? (HR Perspective)
🔹 Option 1: Register the Company Under Your Name (With Proper Disclosures)
Suitable if your employment contract does not restrict external business ventures
Be transparent with your employer and future organizations
🔹 Option 2: Appoint a Co-Founder or Silent Director
If your employer has strict policies, you can register the company but appoint a director for operations
You will remain a shareholder and have control over decision-making
🔹 Option 3: Get Prior Approval from HR (Only if required as per your contract)
If policies require approval, get written consent from your employer before incorporating
📌 Final HR Advice
✔ Registering a company in your name is legally allowed, but ensure there's no conflict of interest
✔ Disclose it upfront to avoid background verification issues in future job opportunities
✔ If needed, take a legal consultation to avoid employment contract violations
From India, Gurugram
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Dear Sachin,
Employers always aspire to expand their businesses. Since they cannot handle all the activities on their own, they delegate part of the work to the employees. As the businesses grow, the process of delegation develops multiple layers and hierarchies in the organization. Whatever the position of the employee in the hierarchy may be, the employer expects them to serve loyally and faithfully by devoting their energy to promoting the interest of the organization, always thinking about enhancing customer satisfaction, suggesting innovative ideas to improve systems and processes, etc. But to do all this requires a single-minded focus. If the employee starts working concurrently for one's organization, his or her attention will be diverted. Do you think any employer will accept this? Certainly not!
As a via media, you can start a company assigning its ownership to your spouse or any other blood relative. You should not have any shareholding. Theoretically, this may look like a good option; however, it is also fraught with challenges. This is because approaching the customers, convincing them to give you business, and further fulfilling their expectations about the quality of the product or services is no easy task. It could require far greater energy than you think! Furthermore, do not assume that a satisfied customer will pay you on time. You need to do a lot of follow-up to get payment from the customers.
Thanks,
Dinesh Divekar
From India, Bangalore
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Employers always aspire to expand their businesses. Since they cannot handle all the activities on their own, they delegate part of the work to the employees. As the businesses grow, the process of delegation develops multiple layers and hierarchies in the organization. Whatever the position of the employee in the hierarchy may be, the employer expects them to serve loyally and faithfully by devoting their energy to promoting the interest of the organization, always thinking about enhancing customer satisfaction, suggesting innovative ideas to improve systems and processes, etc. But to do all this requires a single-minded focus. If the employee starts working concurrently for one's organization, his or her attention will be diverted. Do you think any employer will accept this? Certainly not!
As a via media, you can start a company assigning its ownership to your spouse or any other blood relative. You should not have any shareholding. Theoretically, this may look like a good option; however, it is also fraught with challenges. This is because approaching the customers, convincing them to give you business, and further fulfilling their expectations about the quality of the product or services is no easy task. It could require far greater energy than you think! Furthermore, do not assume that a satisfied customer will pay you on time. You need to do a lot of follow-up to get payment from the customers.
Thanks,
Dinesh Divekar
From India, Bangalore
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You work in IT, and presumably, that is your area of expertise.
Conflict of Interest in Starting an IT Company
If you try to start your own company dealing with IT in any way, shape, or form, you will automatically have a conflict of interest, and no employer is going to allow you to continue working for them under those circumstances. As previous legal cases have shown, it is extremely difficult to prove you have not stolen company information, intellectual property, and customers from a current or previous employer.
Challenges of Starting a Business While Employed
Even if you could find something totally different from IT, such as making and selling pottery, as my colleague Dinesh above has stated, it is extremely difficult to set up a new business, find customers, service those customers, and build the business while employed full-time elsewhere. That quickly leads to burnout, and you then become ineffective in your day job; management puts you on a performance management plan, and eventually, you are terminated.
Importance of a Comprehensive Business Plan
All these risks should be comprehensively covered in your SWOT analysis in your business plan. But my guess is that you have done little or no planning, let alone written a full business plan.
Remember the golden rule - FAILURE TO PLAN IS PLANNING TO FAIL.
From Australia, Melbourne
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Conflict of Interest in Starting an IT Company
If you try to start your own company dealing with IT in any way, shape, or form, you will automatically have a conflict of interest, and no employer is going to allow you to continue working for them under those circumstances. As previous legal cases have shown, it is extremely difficult to prove you have not stolen company information, intellectual property, and customers from a current or previous employer.
Challenges of Starting a Business While Employed
Even if you could find something totally different from IT, such as making and selling pottery, as my colleague Dinesh above has stated, it is extremely difficult to set up a new business, find customers, service those customers, and build the business while employed full-time elsewhere. That quickly leads to burnout, and you then become ineffective in your day job; management puts you on a performance management plan, and eventually, you are terminated.
Importance of a Comprehensive Business Plan
All these risks should be comprehensively covered in your SWOT analysis in your business plan. But my guess is that you have done little or no planning, let alone written a full business plan.
Remember the golden rule - FAILURE TO PLAN IS PLANNING TO FAIL.
From Australia, Melbourne
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Nothing stops anyone from starting a company. But a company needs two shareholders, so you cannot start on your own. If you are not involving a family member, how will you form it?
Employment Contract Considerations
Does your employment contract allow you to engage in any business activities other than your work for which you receive a salary? If not, you may face issues if your employer discovers it. They often find out due to some document lying around or because someone informs them. They are unlikely to search for you directly, but you need a DIN (Director Identification Number), and that information is public. Your directorship of companies is also public knowledge.
Future Employment Implications
How your new or future company will view this is another story. I do not think anyone can predict it. Perhaps you will need to find a specific company where this is acceptable and they are flexible. In such a case, you might have to sacrifice your earning potential from a salary. Obviously, a company like TCS will refuse to give you a job if you are also involved in a separate business.
From India, Mumbai
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Employment Contract Considerations
Does your employment contract allow you to engage in any business activities other than your work for which you receive a salary? If not, you may face issues if your employer discovers it. They often find out due to some document lying around or because someone informs them. They are unlikely to search for you directly, but you need a DIN (Director Identification Number), and that information is public. Your directorship of companies is also public knowledge.
Future Employment Implications
How your new or future company will view this is another story. I do not think anyone can predict it. Perhaps you will need to find a specific company where this is acceptable and they are flexible. In such a case, you might have to sacrifice your earning potential from a salary. Obviously, a company like TCS will refuse to give you a job if you are also involved in a separate business.
From India, Mumbai
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(Fact Checked)-Your post is accurate. Starting a company requires at least 2 shareholders as per the Companies Act, 2013. Verification of employment contracts is crucial to avoid legal complications. Indeed, directorships are public knowledge through DIN. (1 Acknowledge point)
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Yes, you can start a new company. Since you work in IT and the one you intend to start is non-IT, there is no conflict of interest. If you are confident in managing your time between your full-time work and business, you can certainly proceed.
Starting a Company: Options and Considerations
A private company needs to have two persons. If you don't want to involve anyone else, you can start an OPC - One Person Company.
Alternative: Sole Proprietorship
One suggestion is to start a business without registering a company. Registering a company involves significant regulatory and statutory compliances. Instead, you can start a sole proprietorship with a business name. It is easy to register a sole proprietorship; you can do it online from home in less than 30 minutes. To open a bank account, the KYC is simple—just Udyog Aadhaar, your PAN, Aadhaar, and address proof documents are sufficient.
Once it grows big and you have the resources to handle all activities, you can convert it into a company. Converting a sole proprietorship into a company is not complex.
Employer Restrictions
Some companies have restrictions in place, prohibiting employees from working in another job or carrying out other businesses. If your employer has no objection, then you can certainly start a business.
From India, Chennai
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Starting a Company: Options and Considerations
A private company needs to have two persons. If you don't want to involve anyone else, you can start an OPC - One Person Company.
Alternative: Sole Proprietorship
One suggestion is to start a business without registering a company. Registering a company involves significant regulatory and statutory compliances. Instead, you can start a sole proprietorship with a business name. It is easy to register a sole proprietorship; you can do it online from home in less than 30 minutes. To open a bank account, the KYC is simple—just Udyog Aadhaar, your PAN, Aadhaar, and address proof documents are sufficient.
Once it grows big and you have the resources to handle all activities, you can convert it into a company. Converting a sole proprietorship into a company is not complex.
Employer Restrictions
Some companies have restrictions in place, prohibiting employees from working in another job or carrying out other businesses. If your employer has no objection, then you can certainly start a business.
From India, Chennai
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(Fact Checked)-Your advice on OPC and Sole Proprietorship is spot on. Please remember to check the company's policy on secondary employment. Keep contributing! (1 Acknowledge point)
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