The first question that comes to my mind is: Do you really need to quit? Having an income while you moonlight is a huge advantage, as you can survive until your start-up is sustainable (and then quit your day job)
Second: Do you have enough savings to survive a year on your own? If not, keep your current job, build your savings and then quit.
Third: Are you in good terms with your immediate manager? If yes, then do tell him/her -- You might be able to even negotiate an alternative deal, like part-time, contracting or something else. If not, then tell him/her only if asked. In any case, it's certainly better to learn the news through you than through someone else.
Obviously, what I wrote in this post does not apply if you and your employer have a conflict of interests. If that's the case, I'd talk to a lawyer.