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.
for sure here! and PE firms, if you look at the "Management of companies & enterprises (55): Holding companies and corporate headquarters" numbers, the growth is 57% from 2020 to 2025. the highest of any sector.
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'm going to push back on the fake business boom here and suggest that many of these companies may not be fake — they may be solo businesses. Just because a business doesn't create tons of jobs doesn't make it any less viable than a founder-led startup.
Also, there's nothing wrong with starting a business on the side. For many people, that W-2 job or corporate career is the first funder of their budding business. Access to capital is a real issue. Often, it's not a question of commitment, but of resources.
And one last thing (before I get off my soapbox :), for many entrepreneurs, scale now means going deeper instead of wider. Not everyone aspires to own a big business, but more people do aspire to own an aligned business — one that doesn't drive them into the ground or burn them out.
The Phoebe Gates fakery is another issue. Some companies may be fudging their numbers. I certainly agree that our culture is obsessed with founderdom, but that doesn't mean the majority of these businesses are fake.
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.
Ed, one load-bearing claim in this piece has no source under it: that revenue for these non-employer businesses is "plummeting." The Census Bureau's own Nonemployer Statistics—the series that actually tracks receipts for this population — shows average receipts per non-employer business rose from roughly $47,800 in 2020 to $57,000 in 2022, with total receipts up from $1.3 trillion to $1.7 trillion. That's growth, not collapse. And the count of non-employer businesses has outpaced employer-business formation almost every year since 2012, which actually supports your own instinct that this isn't an AI story, just for a different reason: it's not new, and it's not fake.
There's a simpler explanation your theory skips past on the supply side: a solo founder today can do the front end, back end, and DevOps with an AI coding assistant, then get help designing the site, writing the copy, and building the brand—all without hiring anyone. That's not a hobby wearing an LLC as a costume. It's a genuinely lean, deliberately unstaffed business, and "likely non-employer" is exactly the classification it would earn on a Census form, for reasons that have nothing to do with being fake.
But there's a demand-side explanation you skip entirely, and it matters more than the founder-worship narrative: for a lot of people filing that $130 LLC, self-employment isn't a status symbol. It's what's left after the job search failed. Companies have been downsizing and laying off across white-collar professions for two straight years, and a laid-off marketer, engineer, or accountant who can't find a role in their field doesn't stop working. They start billing themselves out, incorporate to do it cleanly, and get filed by the Census as a "likely non-employer" indistinguishable from your cousin's Substack. That's not the cult of founderdom. That's the safety net failing to catch someone, in real time, on a government form. Before concluding these are Instagram accounts pretending to be companies, it'd be worth separating the aspirational filings from the involuntary ones—because right now your theory only accounts for people who wanted to be founders, and says nothing about the people who had no other option.
This may be the best comment on this thread. The whole fake business narrative is a more shallow analysis of the situation than I expect from Prof G Media. The solo business is rising. The jump in 2020 supports the hypothesis that laid off workers unable to find comparable employment are striking out on their own and contracting their skills. That aligns with the rise in fractional executives, the persistent economic shocks, and the fact that the average billings of these firms is rising. Canada saw a similar boon in the last decade (and for similar reasons), although that seems to have flatlined in recent years. Likely due to pressure on consulting services. It will be interesting to see what happens as economies begin to rebound - although we may have to wait a while for that.
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.
Based on my own experience as someone who started a non employer business after being displaced by my industry, it does depend on the age of the 'founder'. I started my solo business because freelance clients demanded I have a business structure in place to show I wasn't an employee pretending to be a contractor.
What Ed is talking about here isn't new. When I started, everybody seemed to be starting Blogger Blogs as their path to prosperity. The term back then was 'hopeful hobbyist'. That your blog would catch on, expand and allow you to build a digital publishing empire from humble hopeful beginnings. Blogs then, Podcasts now.
Ed is not wrong about his peer group setting up 'fake businesses' as a socially acceptable way to avoid getting a job. One of my long time clients is our regional Small Business Development Center. The appointments with younger 'business owners' all fit the same profile: the entity launched a year or two before, hasn't made revenue, and the parents of the 'founder' got the number for the SBDC and forced them to set up a meeting with us so we could help legitimize their enterprise. Almost every 'founder' came in, explained why they were there, under protest, and wanted our team to tell them how to be rich and famous because otherwise they were being forced to get a job.
That said, the majority of people we meet with are 45+ years old, recently displaced from a job that paid a middle class wage, too old to hire, too young and too poor to retire, has a house they can't sell to relocate to a better job market, and has a life where they live now, where the relatively low non employer business annual revenue average is respectable and less soul crushing than working at Burger King.
The stats Ed shares here combined with my own experiences tell me what I already know: the employment picture in this country is horrible, people are giving up because it is pointless, and, just like I was 22 years ago, people are starting a solo business because they have to. And the members of the Gen Z crowd that are actually serious about starting a business for similar reasons (the minority, admittedly) when their options are making 35k at a job that requires a masters and 3 years of experience or taking a gamble on themselves for a few years, they take the leap.
this is the last leg of the dead internet economy. it used to be that a person writes a tweet, goes viral, then makes a shopify business as a reaction. but the time is already past. their moment is in the rear view mirror, and these people try to be a bastion of inspiration for people as they notice their one-off moment is not a staying phenomenon. no amount of cult-like posting brings back their 15 minutes of fame.
NOW, it seems people believe 'if I start a business, money will flow into my pocket like direct deposit.' A HUGE wave of rent-seekers expecting to get money just for existing. But now they exist and can put CEO on their LinkedIn. They don't realize the thing that is missing is a unique business idea with CURRENT revenue. A business with no revenues is an entrepreneur. These people expect guaranteed success because their other 'professionally illiterate' friends encourage them.
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.
Starting a solo business as a consultant, advisor or fractional contributor/leader is incredibly viable with the efficiencies provided by AI tools. You have an all or nothing view on entrepreneurship which ignores the genuine pathway of having a side-gig that you can eventually turn into a main-gig as a solopreneur. People genuinely value the location and time freedom that a solo business can give you.
It’s certainly a worry. Elizabeth Holmes was the first who came to my mind! She didn’t just think that starting a business was easy; she thought science and medicine were easy! Her allergy to making difficult decisions and being patient put people in harms way.
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.
I enjoy this realistic take on a pattern that I think you have - almost - correctly identified.
TLDR: producing is FUN and consuming is less fun, but they are both games - monetizing a game is like gambling, building a business requires formal procedures, discipline and commitment
I have been "building fake businesses" my entire life. I don't have any negative feelings about it, it's been very fun. But I know what it is.
In middle school, I used Microsoft Word to build flyers for a babysitting business, took CPR classes to get certified so my services would stand out. Got a few side jobs and then dropped it. I learned CPR, graphic design, and engaged with my community.
In highschool, I ran a Pokemon card-trading business. Binders, protectors, spreadsheets, made-up prices without the use of a centralized system back in 2001. I made some trades, some cash, kept plenty of cards and dropped it. I learned organizational skills, haggling skills, how to spot a scam, how to use Excel, and engaged with my community.
Recently, I built ipfs-pay-to-pin to enter the Algorand x402 Global Challenge. It allows agents to pay fractions of a penny-per-byte for file storage. I've put it into some agentic "bazaar" marketplace so if any agent needs to store a small file or image, I could make a few pennies per year to permanently host it for them. I took my idea to the algorand developer discord, and they pushed back on the "forever" idea, and I redeployed with a 1-year time box and renewal functionality. Nobody has used this service, and it's costing me about $0.50/month to keep it running. I learned how to implement agent-to-agent payment systems, vibe-coding with spec-driven development, blockchain interactions and smart contracts, and engaged with my community.
I have always been just delusional enough to attempt to see my projects through to fruition - a public package gets deployed, a flyer gets hung, a job gets completed. However, I remain realistic enough to understand that these hobbies, while they MIGHT miraculously take-off, forcing me to grab the reigns and suddenly become an entrepreneur, are just hobbies.
Hobbies are a way to acquire skills, relax, have fun, they're addictive, they're social, they're whatever you need from them. America is obsessed with monetizing their hobbies, and I think this can be a worthwhile obsession (to monetize), if only for the sake of short-term motivation. But we shouldn't be blinded completely to the facts: building a business takes careful legal, structural, financial planning - and it shouldn't be done alone. Even in this age of AI, being given experts in fields that aren't yours... If you can do it with minimal effort, so can anybody else; pour your heart and soul into a project with little/no safety net? Build a business like your life depends on it? Spend all of your time listening to the needs of your customer? Then, I think, you might be closer to an entrepreneur.
No, that is entirely false. Technological changes beginning decades ago allowed people to work solo without hiring anyone. I started my law practice when all filings in court were paper and we needed staff to keep up. As we digitized, it killed the back office jobs. I could cover a week of admin one weekend morning. I ended the staff job.
Fake meaning, no employees, meaning no income taxes generated, no factory/office/sales/distribution/no wages paid, meaning no payroll, or sales taxes generated etc.
In short they do nothing for the economy, which is the point of the piece.
They employ no one, they simply generate revenue for the sole proprietor/employee. Making money at something, does not make it a business, ask any freelance hooker.
Columbus storing it so true. My LinkedIn is full of bro's calling themselves "founders", when what they are one man businesses with no income, no revenue stream and no actual product.
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.
for sure here! and PE firms, if you look at the "Management of companies & enterprises (55): Holding companies and corporate headquarters" numbers, the growth is 57% from 2020 to 2025. the highest of any sector.
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 just had a conversation with a young, newly minted MbA/CPA at dinner, trying to explain this to me.
I'm going to push back on the fake business boom here and suggest that many of these companies may not be fake — they may be solo businesses. Just because a business doesn't create tons of jobs doesn't make it any less viable than a founder-led startup.
Also, there's nothing wrong with starting a business on the side. For many people, that W-2 job or corporate career is the first funder of their budding business. Access to capital is a real issue. Often, it's not a question of commitment, but of resources.
And one last thing (before I get off my soapbox :), for many entrepreneurs, scale now means going deeper instead of wider. Not everyone aspires to own a big business, but more people do aspire to own an aligned business — one that doesn't drive them into the ground or burn them out.
The Phoebe Gates fakery is another issue. Some companies may be fudging their numbers. I certainly agree that our culture is obsessed with founderdom, but that doesn't mean the majority of these businesses are fake.
Excellent points.
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.
Ed, one load-bearing claim in this piece has no source under it: that revenue for these non-employer businesses is "plummeting." The Census Bureau's own Nonemployer Statistics—the series that actually tracks receipts for this population — shows average receipts per non-employer business rose from roughly $47,800 in 2020 to $57,000 in 2022, with total receipts up from $1.3 trillion to $1.7 trillion. That's growth, not collapse. And the count of non-employer businesses has outpaced employer-business formation almost every year since 2012, which actually supports your own instinct that this isn't an AI story, just for a different reason: it's not new, and it's not fake.
There's a simpler explanation your theory skips past on the supply side: a solo founder today can do the front end, back end, and DevOps with an AI coding assistant, then get help designing the site, writing the copy, and building the brand—all without hiring anyone. That's not a hobby wearing an LLC as a costume. It's a genuinely lean, deliberately unstaffed business, and "likely non-employer" is exactly the classification it would earn on a Census form, for reasons that have nothing to do with being fake.
But there's a demand-side explanation you skip entirely, and it matters more than the founder-worship narrative: for a lot of people filing that $130 LLC, self-employment isn't a status symbol. It's what's left after the job search failed. Companies have been downsizing and laying off across white-collar professions for two straight years, and a laid-off marketer, engineer, or accountant who can't find a role in their field doesn't stop working. They start billing themselves out, incorporate to do it cleanly, and get filed by the Census as a "likely non-employer" indistinguishable from your cousin's Substack. That's not the cult of founderdom. That's the safety net failing to catch someone, in real time, on a government form. Before concluding these are Instagram accounts pretending to be companies, it'd be worth separating the aspirational filings from the involuntary ones—because right now your theory only accounts for people who wanted to be founders, and says nothing about the people who had no other option.
This may be the best comment on this thread. The whole fake business narrative is a more shallow analysis of the situation than I expect from Prof G Media. The solo business is rising. The jump in 2020 supports the hypothesis that laid off workers unable to find comparable employment are striking out on their own and contracting their skills. That aligns with the rise in fractional executives, the persistent economic shocks, and the fact that the average billings of these firms is rising. Canada saw a similar boon in the last decade (and for similar reasons), although that seems to have flatlined in recent years. Likely due to pressure on consulting services. It will be interesting to see what happens as economies begin to rebound - although we may have to wait a while for that.
Such a helpful comment.
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.
Based on my own experience as someone who started a non employer business after being displaced by my industry, it does depend on the age of the 'founder'. I started my solo business because freelance clients demanded I have a business structure in place to show I wasn't an employee pretending to be a contractor.
What Ed is talking about here isn't new. When I started, everybody seemed to be starting Blogger Blogs as their path to prosperity. The term back then was 'hopeful hobbyist'. That your blog would catch on, expand and allow you to build a digital publishing empire from humble hopeful beginnings. Blogs then, Podcasts now.
Ed is not wrong about his peer group setting up 'fake businesses' as a socially acceptable way to avoid getting a job. One of my long time clients is our regional Small Business Development Center. The appointments with younger 'business owners' all fit the same profile: the entity launched a year or two before, hasn't made revenue, and the parents of the 'founder' got the number for the SBDC and forced them to set up a meeting with us so we could help legitimize their enterprise. Almost every 'founder' came in, explained why they were there, under protest, and wanted our team to tell them how to be rich and famous because otherwise they were being forced to get a job.
That said, the majority of people we meet with are 45+ years old, recently displaced from a job that paid a middle class wage, too old to hire, too young and too poor to retire, has a house they can't sell to relocate to a better job market, and has a life where they live now, where the relatively low non employer business annual revenue average is respectable and less soul crushing than working at Burger King.
The stats Ed shares here combined with my own experiences tell me what I already know: the employment picture in this country is horrible, people are giving up because it is pointless, and, just like I was 22 years ago, people are starting a solo business because they have to. And the members of the Gen Z crowd that are actually serious about starting a business for similar reasons (the minority, admittedly) when their options are making 35k at a job that requires a masters and 3 years of experience or taking a gamble on themselves for a few years, they take the leap.
this is the last leg of the dead internet economy. it used to be that a person writes a tweet, goes viral, then makes a shopify business as a reaction. but the time is already past. their moment is in the rear view mirror, and these people try to be a bastion of inspiration for people as they notice their one-off moment is not a staying phenomenon. no amount of cult-like posting brings back their 15 minutes of fame.
NOW, it seems people believe 'if I start a business, money will flow into my pocket like direct deposit.' A HUGE wave of rent-seekers expecting to get money just for existing. But now they exist and can put CEO on their LinkedIn. They don't realize the thing that is missing is a unique business idea with CURRENT revenue. A business with no revenues is an entrepreneur. These people expect guaranteed success because their other 'professionally illiterate' friends encourage them.
It's vanity. It's a Facebook status with a FEIN.
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.
I think you missed the mark on this one.
Starting a solo business as a consultant, advisor or fractional contributor/leader is incredibly viable with the efficiencies provided by AI tools. You have an all or nothing view on entrepreneurship which ignores the genuine pathway of having a side-gig that you can eventually turn into a main-gig as a solopreneur. People genuinely value the location and time freedom that a solo business can give you.
It’s certainly a worry. Elizabeth Holmes was the first who came to my mind! She didn’t just think that starting a business was easy; she thought science and medicine were easy! Her allergy to making difficult decisions and being patient put people in harms way.
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.
I think you are spot on Ed. Many similar examples all around me lately. Good work Ed.
I enjoy this realistic take on a pattern that I think you have - almost - correctly identified.
TLDR: producing is FUN and consuming is less fun, but they are both games - monetizing a game is like gambling, building a business requires formal procedures, discipline and commitment
I have been "building fake businesses" my entire life. I don't have any negative feelings about it, it's been very fun. But I know what it is.
In middle school, I used Microsoft Word to build flyers for a babysitting business, took CPR classes to get certified so my services would stand out. Got a few side jobs and then dropped it. I learned CPR, graphic design, and engaged with my community.
In highschool, I ran a Pokemon card-trading business. Binders, protectors, spreadsheets, made-up prices without the use of a centralized system back in 2001. I made some trades, some cash, kept plenty of cards and dropped it. I learned organizational skills, haggling skills, how to spot a scam, how to use Excel, and engaged with my community.
Recently, I built ipfs-pay-to-pin to enter the Algorand x402 Global Challenge. It allows agents to pay fractions of a penny-per-byte for file storage. I've put it into some agentic "bazaar" marketplace so if any agent needs to store a small file or image, I could make a few pennies per year to permanently host it for them. I took my idea to the algorand developer discord, and they pushed back on the "forever" idea, and I redeployed with a 1-year time box and renewal functionality. Nobody has used this service, and it's costing me about $0.50/month to keep it running. I learned how to implement agent-to-agent payment systems, vibe-coding with spec-driven development, blockchain interactions and smart contracts, and engaged with my community.
I have always been just delusional enough to attempt to see my projects through to fruition - a public package gets deployed, a flyer gets hung, a job gets completed. However, I remain realistic enough to understand that these hobbies, while they MIGHT miraculously take-off, forcing me to grab the reigns and suddenly become an entrepreneur, are just hobbies.
Hobbies are a way to acquire skills, relax, have fun, they're addictive, they're social, they're whatever you need from them. America is obsessed with monetizing their hobbies, and I think this can be a worthwhile obsession (to monetize), if only for the sake of short-term motivation. But we shouldn't be blinded completely to the facts: building a business takes careful legal, structural, financial planning - and it shouldn't be done alone. Even in this age of AI, being given experts in fields that aren't yours... If you can do it with minimal effort, so can anybody else; pour your heart and soul into a project with little/no safety net? Build a business like your life depends on it? Spend all of your time listening to the needs of your customer? Then, I think, you might be closer to an entrepreneur.
No, that is entirely false. Technological changes beginning decades ago allowed people to work solo without hiring anyone. I started my law practice when all filings in court were paper and we needed staff to keep up. As we digitized, it killed the back office jobs. I could cover a week of admin one weekend morning. I ended the staff job.
Solo businesses are fake businesses.
Fake meaning, no employees, meaning no income taxes generated, no factory/office/sales/distribution/no wages paid, meaning no payroll, or sales taxes generated etc.
In short they do nothing for the economy, which is the point of the piece.
They employ no one, they simply generate revenue for the sole proprietor/employee. Making money at something, does not make it a business, ask any freelance hooker.
Columbus storing it so true. My LinkedIn is full of bro's calling themselves "founders", when what they are one man businesses with no income, no revenue stream and no actual product.