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Surge in start-ups continuing

On Behalf of | Aug 24, 2021 | Business Law

Economists had bemoaned the slow, inexorable decline of entrepreneurship in America since 1980. Long seen as an important bell weather of a dynamic economy, business start-ups are a key ingredient necessary for job growth and resiliency that will sustain a productive economy through future recessions. But until recently, new business formation had been declining, from 12% in 1980 to a low of 8% in 2018.

According to recent news, however, the turnaround in start-ups began in early 2020, and in spite of predictions that it would slow down once started reopening again, economists are seeing signs that entrepreneurship may continue strong growth. There are indicators that the upward trend is not just in retail, food service or logistics, but also in that manufacturing industry, construction and elsewhere.

Although the last recession also triggered layoffs that spurred some to start new businesses, the lack of capital, accompanied by plummeting home values, discouraged growth. This time around, the Federal Reserve moved quickly to stabilize the economy, offering unemployment benefits and stimulus checks, which allowed people to find a niche that provides services to consumers in a changed, and increasingly virtual, world.

The importance of choosing the right business structure

Kentucky entrepreneurs will want to choose a business structure that factors in their preferred management and operational styles as well as liability and ownership interests. A new business owner should also be aware of the tax implications of the chosen structure during formation.

The most common business entities are:

  • A sole proprietorship, which is not a separate legal entity, has one owner who is personally liable for business debts or liability.
  • A partnership, which has two or more owners who share profits and loss on their personal income tax, are also personally liable, but a limited partnership lends limited liability for some of the co-owners.
  • A corporation, whose owners are shareholders with limited liability, is a separate legal and tax entity with a managerial structure to oversee operations.
  • A limited liability corporation, which limits the liability of its owners, also has tax advantages by allowing profits and losses to pass through to individual owners.

When deciding which business structure most closely lines up with your plans and vision for the enterprise, as well as your unique situation, it is important to have the best information at your disposal.