Non-Compete Agreements and Side Projects
Most executive employment agreements include some form of non-compete or non-solicitation clause. These clauses vary enormously in scope, duration, and enforceability depending on your state, your industry, and the specific language in your agreement. Before starting any side project, have an employment attorney review your agreement and provide a written opinion on whether your proposed venture falls within its restrictions.
The good news for most executives is that non-compete clauses typically restrict competition with your employer's specific business, not all entrepreneurial activity. If you are the CEO of a supply chain software company and your side project is a fitness class booking platform, there is no competitive overlap and most non-compete clauses do not apply. If your side project is in the same industry, the analysis becomes more nuanced and legal counsel is essential.
Several states—including California, Oklahoma, and North Dakota—have banned or severely limited non-compete enforcement for employees. Other states are following suit. However, executive-level employees are sometimes carved out from these protections, and non-solicitation clauses (restricting you from poaching employees or customers) may remain enforceable even where non-competes are not. Do not assume your state's general rules apply to your specific situation without legal verification.
Intellectual Property Ownership
Intellectual property ownership is the most legally dangerous area for executive side projects. Many employment agreements include an "invention assignment" clause that assigns to your employer all intellectual property you create during your employment—even IP created on your own time, using your own equipment, if it relates to your employer's business.
The safest approach is to ensure your side project is built entirely on separate infrastructure, during non-work hours, using no company resources—not even your work laptop, company email, or corporate Slack. Use a separate computer, separate email addresses, and separate communication tools. If your employment agreement has a broad invention assignment clause, negotiate a specific carve-out for your side project in writing before you begin development.
When you engage an external development partner like Sizzle Ventures to build your side project, the IP ownership structure is defined in the development agreement. Typically, all code, designs, and intellectual property created during the engagement are assigned to your entity upon payment. This clean IP chain is important not just for legal protection today, but for any future investment, acquisition, or partnership where buyers and investors will scrutinize IP ownership as part of due diligence.
Fiduciary Duties and Disclosure Obligations
If you are a C-suite executive, officer, or board member of your company, you have fiduciary duties that constrain your outside business activities. These duties include the duty of loyalty—requiring you to act in the company's best interest—and the duty to avoid self-dealing or conflicts of interest. A side project that competes with your company, diverts corporate opportunities, or uses company resources could constitute a breach of fiduciary duty.
The practical solution is disclosure and documentation. Inform your board or CEO about your side project. Provide a written description of the venture, confirm that it does not compete with the company, and document that no company resources will be used. Most boards view this favorably—it demonstrates entrepreneurial initiative and transparency. The executives who get into trouble are those who hide their side projects and are discovered later.
If you are a public company executive, additional securities law considerations may apply. Depending on the nature of your side project, you may have disclosure obligations under SEC regulations. Your corporate counsel or outside securities attorney should be consulted before launch. This is not an area where internet research or AI-generated advice should substitute for qualified legal counsel.
Structuring the Legal Foundation
Every executive side project should have a proper legal foundation established before development begins. At minimum, this includes: a separate legal entity (typically an LLC or corporation), an operating agreement that defines ownership and decision-making, a development agreement with your build partner that addresses IP assignment, confidentiality, and deliverables, and appropriate insurance coverage.
The entity structure matters for both liability protection and tax optimization. A single-member LLC provides pass-through taxation and liability separation. A C-corporation may be preferable if you anticipate raising outside investment, as investors typically prefer the C-corp structure. Your attorney and CPA should collaborate on the entity selection based on your specific goals and tax situation.
Budget $3K to $8K for the legal foundation: entity formation, operating agreement, employment agreement review, and development contract review. This is a small investment relative to the total project cost, and it eliminates entire categories of risk that could otherwise derail the venture or create personal liability. If you need referrals to attorneys experienced with executive side projects, contact the Sizzle team—they work with executives launching ventures regularly and maintain a network of vetted legal professionals.
Ready to Build Your Side Project?
Executives across every industry are turning side project ideas into real products—without pulling a single engineer off their core team. The key is working with a partner who understands both the technical execution and the strategic context of building alongside a day job.
Sizzle Ventures helps executives go from idea to launched product in as little as 90 days. Our MVP Sprint is built specifically for leaders who need speed without sacrificing quality—and without touching their internal dev team.
Ready to explore what's possible? Start a conversation with Sizzle about bringing your side project to life.