They could well try to claim stake or ownership on your company, even if they lost, the distraction and money it would cost to defend probably aren’t worth it.
Note that not only is this not legal in California (but is in others -- Texas is particuarly notorios) but any employment agreement in California must specifically include a copy of the relevant section of law so that the employee is a aware of their rights. But don't use any of the employer's property (e.g. computer, IP) or do it when you are supposedly working: in that case the law does not apply and the employer does get the rights.