Creating & Selling Hardware

Thread Starter

tvist21

Joined Jun 11, 2021
7
I work for a company that designs custom lighting hardware. Projects are based on customer needs but sometimes project scopes change and a design I think of is no longer needed. I would like to start my own company and start designing and selling my own hardware but I don't want there to be conflict between my own future business and my current place of work. I figured that I could continue to build things outside of work and then the company I work for could buy items from my company since we already purchase A LOT of bought out items (I would create and sell items that do not exist on the market). How does kind of thing work? Do I create an LLC?
 

Jim@HiTek

Joined Jul 30, 2017
50
Bob's right about that, so is Sam. So talk to the managers at work about if they'd be interested in saving money by buying certain devices you design and make as a contractor at home. Assuming you'd not have to infringe on their IP.

First step is to create and register a business name - $$. Try to get one that's available nation wide, cost rises if it's a national name. Next, go to city hall and register your 'Cottage' business, pay for your business license, ~$100 to $500. Tack it on the wall. Then get an EIN# from the IRS...very important...so you're straight with the feds. It's your SSA number with any business you work with that wants to pay you. You get to use the very generous form C when you file taxes, I did it as an income making hobby for several years and then morphed into a business. Had I known how generous the IRS is to businesses I would have switched years earlier. You get to offset your income based on the square footage of your home office and manufacturing area. Cool.

You're trying to start a cottage business, (assuming you'll start at home and not pay outrageous amounts of money for business space), so when you apply for your cottage business license, be sure you check mark the part on the form that says you will have ZERO drive up customers. Gets messy when you say you'll have 100 customers every week...wishful thinking on your part most likely....so don't mention it. If you start a business in your home, you have neighbors to think about. And traffic, and parking, and manufacturing noise, smells, and whatnot. So cities, town, villages don't care for really active businesses in homes. But starting a business in the home is the best route until you're making money. Sort of a Catch22.

Once you start making money, then think about an LLC. BTW, you can apply for your own LLC whenever you want to...no need to hire some company or consultant to do it for you like an 'INC' after your company name would need.

Good luck, take your time, don't waste money.
 

Thread Starter

tvist21

Joined Jun 11, 2021
7
Bob's right about that, so is Sam. So talk to the managers at work about if they'd be interested in saving money by buying certain devices you design and make as a contractor at home. Assuming you'd not have to infringe on their IP.

First step is to create and register a business name - $$. Try to get one that's available nation wide, cost rises if it's a national name. Next, go to city hall and register your 'Cottage' business, pay for your business license, ~$100 to $500. Tack it on the wall. Then get an EIN# from the IRS...very important...so you're straight with the feds. It's your SSA number with any business you work with that wants to pay you. You get to use the very generous form C when you file taxes, I did it as an income making hobby for several years and then morphed into a business. Had I known how generous the IRS is to businesses I would have switched years earlier. You get to offset your income based on the square footage of your home office and manufacturing area. Cool.

You're trying to start a cottage business, (assuming you'll start at home and not pay outrageous amounts of money for business space), so when you apply for your cottage business license, be sure you check mark the part on the form that says you will have ZERO drive up customers. Gets messy when you say you'll have 100 customers every week...wishful thinking on your part most likely....so don't mention it. If you start a business in your home, you have neighbors to think about. And traffic, and parking, and manufacturing noise, smells, and whatnot. So cities, town, villages don't care for really active businesses in homes. But starting a business in the home is the best route until you're making money. Sort of a Catch22.

Once you start making money, then think about an LLC. BTW, you can apply for your own LLC whenever you want to...no need to hire some company or consultant to do it for you like an 'INC' after your company name would need.

Good luck, take your time, don't waste money.
Thanks for the information. As for the design agreement & non-compete clause, do you have any idea what would generally be denoted as proprietary for a company? We have no electrical patents and the circuits I've designed so far are very basic (timer circuits using timer ICs, smart boost regulators with sensors connected to microcontrollers all based off of evaluation products bought online). I suspect that my manager would interpret anything I've designed as proprietary but a lot of what I make comes from schematics online.
 

Jim@HiTek

Joined Jul 30, 2017
50
Did you sign a non-disclosure and/or a non-compete agreement? That's what you go by. If your designs are from prior art BUT which make use of different properties, functions, or conditions, then it doesn't matter that you got it online. It's now new art, and that company owns the rights to it. Note that in the US, the patent office is a much neglected 'corporate' paper mill now. Totally useless. But there ARE laws and rules pertaining to intellectual property and as an ex-employee, you have a responsibility to work out an agreement with your former employer, in writing, that protects you from them suing you claiming that you stole their IP, if you try to use that IP. It's tricky, but you can work something out with them as a contractor. They would happily work with you in a perfect world, but it isn't so you're going to need to be a good schmoozer. Also, TIME is your friend. If you can come up with a different product after you leave them, and make money at it, you may not care about selling to them at all until a couple 3 years have passed. Then they wouldn't likely remember things as clearly. And finally, goodwill with your former employer is necessary for what you want to do IF you really want to sell to them. And not JUST with your former manager, but on up the line. CEO, COO, etc. Even the CEOs secretary is important enough to schmooze.

After considering all this, many proto-entrepreneurs have struck out on their own in a different direction just to avoid the hassle. Your soon to be former company probably has resources to lawyer up. Do you?
 

Irving

Joined Jan 30, 2016
2,320
Hard to say as ultimately it depends on your existing contract. In every company I've worked for, circuit design, schematics, board layouts, etc., etc., deemed part of my job all belong to the employer. As a specific example the employers business at the time was digital telecoms and I did have a sideline, designing & building custom audio gear. It was agreed it was non-competitive and so ok but i had to agree in writing that i wouldn't do anything on company time nor use any of their equipment or resources...
 

SamR

Joined Mar 19, 2019
3,616
It really depends on what you signed at hire. But just about anything on paper (or electronic media), whether finished drawing or sketches, is considered proprietary company property. What you carry away in your brain, unless it is a design for what the company sells, is yours unless protected by contract or patent.
 

GetDeviceInfo

Joined Jun 7, 2009
1,920
I work for a company that designs custom lighting hardware. Projects are based on customer needs but sometimes project scopes change and a design I think of is no longer needed. I would like to start my own company and start designing and selling my own hardware but I don't want there to be conflict between my own future business and my current place of work. I figured that I could continue to build things outside of work and then the company I work for could buy items from my company since we already purchase A LOT of bought out items (I would create and sell items that do not exist on the market). How does kind of thing work? Do I create an LLC?
An agreement with the company could allow you to do that. Your biggest challenge would be to negotiate language that would make it viable for both entities, and unless that language dictated your company structure, you would consider legal exposure, tax strategies, etc.
 

SamR

Joined Mar 19, 2019
3,616
You might also want to check out the company's Standard Terms and Conditions to see if there are any gotchas in their requirements to be a contractor. Such things as having a minimum of $2,000,000 liability insurance policy and other egregious requirements for contractors. We had a lot of potential contractors whose lawyers refused to allow them to sign our T&C document required to do business with us.
 

DickCappels

Joined Aug 21, 2008
7,989
Talk it over with your boss. One company at which I worked removed their "no moonlighting" clause in their employment agreement before hiring me because, crudely put, I needed the freedom to get inside other companies for experience.
 

Alec_t

Joined Sep 17, 2013
12,320
Depending on which country you're in, or propose trading in, there are likely various legal hoops you'll have to jump through regarding product safety, quality, EM emissions and susceptibility etc.
 

Irving

Joined Jan 30, 2016
2,320
Depending on which country you're in, or propose trading in, there are likely various legal hoops you'll have to jump through regarding product safety, quality, EM emissions and susceptibility etc.
Its a valid point. In the EU for example equipment built internally as part of a custom system doesn't need independent certification. But as soon as that becomes your 'product' it requires CE compliance and though you can self-certify to some extent it's a non-trivial activity.

I'm sure in the US you'd need to demonstrate compliance with FCC regs for example.

You might also fall foul of 'disguised employee' legislation, eg IR35 in the UK
 

BobTPH

Joined Jun 5, 2013
4,053
The agreement my last employer wanted me to sign was so broad that they would have owned it if I wrote a hit song. I got them to narrow it to things actually related to their business.

Edited to add: I guess I should have expected that seeing as their founder wrote a book entitled “Only the Paranoid Survive.”

Bob
 

Jim@HiTek

Joined Jul 30, 2017
50
Had the same problem as you, BobTPH, a couple times. But they were just not interested in rewriting their NDA. I convinced them that it wasn't necessary anyway. In fact, as I remember back, mostly just used the 'I'm a professional' line and that works.
 

Delta Prime

Joined Nov 15, 2019
1,191
I figured that I could continue to build things outside of work and then the company I work for could buy items from my company since we already purchase A LOT of bought out items (I would create and sell items that do not exist on the market). How does kind of thing work?
Over here in the United States I can tell you exactly how it works. The Justice Department assigns a special prosecutor for "money laundering!"
 

SamR

Joined Mar 19, 2019
3,616
Out T&C was so broad that no lawyer would let his client sign it in good faith. Written by our lawyers and even our Project Engineering Manager said he'd never sign it. On the other hand, it was so broad it would probably never have held up in court. Case of deep pockets win out every time. We had little trouble finding contractors who would sign it, lawyers or not. Such is business... Give me an engineering problem anytime over lawyers and accountants.
 

Irving

Joined Jan 30, 2016
2,320
Back in the day - around early 1980s - I was working on a head-up display using a new state-of-the-art mil-spec graphics chip set (80x24 lines text and 640 x 480 8-bit colour with graphics primitives!) and was heavily involved working with the chip manufacturer during our end equipment type-approval testing (temperature, vibration, EMC, etc) so was one of the few engineers with both the hardware and software expertise with said chip set. I was approached by another company who were also planning to use the chip set in their displays for a new synthetic aperture radar system. The two products didn't compete, other than being in the 'electronic warfare' space and the offer on the table was extremely attractive but my then employer tried hard to argue that the knowledge I'd gained was proprietary to them, which of course it wasn't. Lawyers on both sides got involved. Eventually I did move company (with a big salary hike) and my new employer paid my old one an undisclosed sum to release me from my contract. I had to leave my log book and other documentation behind but most of it was (and still is) in my head. I came very close to setting up my own company to provide those services and systems but eventually chose not to as it was a relatively narrow market place. It was another 18y before I eventually moved to being my own boss as an independent engineering consultant/project manager during and after the dot-com boom (the very lucrative years between 2000 - 2007 approx). Looking back, I often wonder now if that was the right decision. and how things might have gone differently...
 
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