The label will launch next year, following the release of her fourth solo album, and Cheryl, 31, is planning to give the news project her full attention.
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A source told the Mirror: "It's a natural next step for Cheryl, having coached contestants for years on The X Factor.
"She knows what it takes to success in the industry from her experience as a performer – both as a solo artist and as a group, from her years in Girls Aloud.
"Cheryl definitely knows her stuff. The artists she'll be interested in won't just be pop acts – it will cross over all genres. She loves music and is really excited about being able to springboard new talent."
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For now though, Cheryl is gearing up for the release of Only Human. The source added: "Once [it's] been released – towards the end of the year – she's going to focus all her attention on her label."
Simon admitted he would support Cheryl if she decided to start a label, even offering to let her do it under Sony.
He said: "I've said to Cheryl if she wants a label at Sony I would do it in a heartbeat because she is a really good judge of talent."
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But it is thought that Cheryl might do it independently, with the source adding: "There's interest from all the big labels, but Cheryl may just go it alone."
Speaking previously about her ambitions, Cheryl said: "I would love to be on that side of it, I love hearing new artists, I love choosing songs and developing acts. So that's something I've got planned."