Have you explored the tax angle? Might be harder to suss out from the data, but I'd bet that LLCs that hold investment properties are a huge part of the boom. I think sure, it's not a business, but it's a liability and tax strategy to hold property this way. On one podcast I listened to a guy had one per investment property, so he had ~200.
I think this is a big part of it. Tax incentives created by the Big Beautiful Bill for “hiring” children and turning investment properties into tax saving businesses, particularly the accelerated depreciation benefits in year 1.
This isn’t right. I have worked with dozens of people who are solo-preneurs which is to say they have started a business, they are working in it full time, and they are the only employee. Many started the business because they couldn’t get hired, but they are serious, even if they have no plans to hire. Examples I have worked with are startups in everything from web designers to financial advisors to business coaches to plumbers to bookkeepers. It is a disservice to many new business owners to call them fake.
My niece and nephew, as well as many of their friends, have a side hustle. Driving Uber or delivering Amazon, event bartender or fashion design. I think you're right that partly it's a creative outlet, but it's also an economic necessity. Quitting their real job entirely is impossible because then they will lack healthcare and it's impossible to afford outside of paid employment. But their jobs are boring and lack any security so the side hustle is a bridge between jobs and some income beyond just paying the rent.
I've been self-employed for over 25 years. I see a lot of young people following the bad advice of influencers, and that is fine, encourage people to try new things while they are young. However, I think most of the new LLCs are owned by older individuals, either NILF or retired. These folks are trying to make some income because they can't afford to retire, or are looking to transfer wealth via one method or another, and/or pay domestic workers and caregivers. As you know, the IRS requires household workers to be on w-2 now, which requires more paperwork and tools that are easier to access via an LLC.
Good write up, interesting topic. Agreeing with Ed Ellis here. Some of these are real businesses. I've run a side business for 23 years selling research about the wedding industry. It's a fragmented market, roughly half solo operators, and it brings in decent revenue every year. Meanwhile I've spent 20 years in aerospace and defense. The side business is a creative outlet that also pays. On the flooding: when the barrier to entry is close to zero, you get a wave of new entrants. That's the wedding industry. Anyone can call themselves a planner, photographer, or DJ on Monday and be taking bookings by Friday. The influencer and entrepreneur economy works the same way.
The New Gold Rush of setting up an Entrepreneurial entity is also a great way for new companies (BNB,Ride Share, etc...)to avoid the capital cost of adding manpower/rolling stock to under capitalized Wet Dream Capitalists!
What used to be the exclusive domain of Pyramid Schemes, where the fast talkers soon seperated you from your $$$$$_
Hopefully this means an adjustment is coming where calling yourself a “founder” is passé. Not because true founders are bad, but purely because the fakes are annoying. We could make “employers” the next cool thing.
Have you explored the tax angle? Might be harder to suss out from the data, but I'd bet that LLCs that hold investment properties are a huge part of the boom. I think sure, it's not a business, but it's a liability and tax strategy to hold property this way. On one podcast I listened to a guy had one per investment property, so he had ~200.
I think this is a big part of it. Tax incentives created by the Big Beautiful Bill for “hiring” children and turning investment properties into tax saving businesses, particularly the accelerated depreciation benefits in year 1.
I think you are spot on Ed. Many similar examples all around me lately. Good work Ed.
This isn’t right. I have worked with dozens of people who are solo-preneurs which is to say they have started a business, they are working in it full time, and they are the only employee. Many started the business because they couldn’t get hired, but they are serious, even if they have no plans to hire. Examples I have worked with are startups in everything from web designers to financial advisors to business coaches to plumbers to bookkeepers. It is a disservice to many new business owners to call them fake.
My niece and nephew, as well as many of their friends, have a side hustle. Driving Uber or delivering Amazon, event bartender or fashion design. I think you're right that partly it's a creative outlet, but it's also an economic necessity. Quitting their real job entirely is impossible because then they will lack healthcare and it's impossible to afford outside of paid employment. But their jobs are boring and lack any security so the side hustle is a bridge between jobs and some income beyond just paying the rent.
I've been self-employed for over 25 years. I see a lot of young people following the bad advice of influencers, and that is fine, encourage people to try new things while they are young. However, I think most of the new LLCs are owned by older individuals, either NILF or retired. These folks are trying to make some income because they can't afford to retire, or are looking to transfer wealth via one method or another, and/or pay domestic workers and caregivers. As you know, the IRS requires household workers to be on w-2 now, which requires more paperwork and tools that are easier to access via an LLC.
Hi Ed - Have you guys hired a research analyst for the Prof G Markets team yet?
Good write up, interesting topic. Agreeing with Ed Ellis here. Some of these are real businesses. I've run a side business for 23 years selling research about the wedding industry. It's a fragmented market, roughly half solo operators, and it brings in decent revenue every year. Meanwhile I've spent 20 years in aerospace and defense. The side business is a creative outlet that also pays. On the flooding: when the barrier to entry is close to zero, you get a wave of new entrants. That's the wedding industry. Anyone can call themselves a planner, photographer, or DJ on Monday and be taking bookings by Friday. The influencer and entrepreneur economy works the same way.
Tax avoidance. Hobbies disguised as businesses; the IRS expects you to actively try to make a profit (the "hobby loss" rule).
Brilliant.
And don't forget all those recently unemployed (federal workers) who set up a solo consultancy.
You made a lot of very poignant observations.
One question: What is your qualifying metric for a "failed business"? Losing money, lack or revenue, or inactivity?
The New Gold Rush of setting up an Entrepreneurial entity is also a great way for new companies (BNB,Ride Share, etc...)to avoid the capital cost of adding manpower/rolling stock to under capitalized Wet Dream Capitalists!
What used to be the exclusive domain of Pyramid Schemes, where the fast talkers soon seperated you from your $$$$$_
Hopefully this means an adjustment is coming where calling yourself a “founder” is passé. Not because true founders are bad, but purely because the fakes are annoying. We could make “employers” the next cool thing.
Tim Dillon had a similar take.
Just wanted to say that I enjoy reading your posts and that you do a nice job. Keep up the good work from a baby boomer lol!
Well said and written Ed. Thanks for opening the can of worms that is founder fixation. I hope you can extend and expose more of this over time.