Is Now a Good Time to Form an LLC?

Posted On:

Do you have a dream of forming an LLC or other type of business? Now may be the time. The economy has been tough on not only Americans but also people around the world. Nearly every sector of the economy has seen a profound slowdown but it could be the perfect recipe for the beginnings of a thriving business.

Noted investor and one of the 10 richest people in the world, Warren Buffett says that when things seem their worst, that is the time to invest. There is good reason for this. First, interest rates are low. Borrowing money to fund your business is cheaper than it has been for decades.

Next, as businesses work to control their inventories, they are selling products at historically low prices. This makes building inventory and purchasing key materials more affordable. In investing terms, this reduces your cost basis which allows you to turn a profit sooner making the business self-sustaining.

While the economic theories seem to indicate that a recession is the perfect time to start a business, are others doing it? According to the Kauffman Foundation, they are. In 2010, 340 out of every 100,000 people started a business. This is the highest number seen in 15 years.

Not only is the climate ripe for forming an LLC, necessity is believed to have fueled the number. As people lost their jobs and couldn’t find employment, they started a business of their own and although this number is impressive, most of the 565,000 monthly business that were formed were not hiring employees. This helps the single person starting the business but doesn’t have the positive effect on job creation that economists want to see. Only 100 people per 100,000 are starting businesses where employees are hired.

If you are of Latino descent, you are statistically more likely to form an LLC or other type of business. 560 per 100,000 formed a business which was twice the rate of Americans. Additionally, the amount of high school dropouts starting a business rose significantly. 590 per 100,000 were starting businesses in 2010 suggesting that necessity was driving business formation among those without a college education.

The construction and service sector saw the most startup formation with Nevada and Georgia leading the 50 states with the most formation.

Not only do the textbooks say that starting a business in times of a slow economy is a good idea but others are finding the courage to start a business of their own.