At no time in the 37-year history of Inc. Yourself have there been so many changes as between the 10th and 11th editions. This is especially true in the areas of an entrepreneur’s choice of business organization, choice of pension plan, and choice of strategies and tactics of investing his or her corporate surplus.
And yet some things do remain the same. The core reasons that people become entrepreneurs have not changed. Much like Shakespeare’s comment on greatness in Twelfth Night, some are born entrepreneurs, some achieve entrepreneurship, and some have entrepreneurship thrust upon them.
Many people have become reluctant entrepreneurs. By early 2002, just when we all thought that the tsunami of corporate downsizing had been completed, more waves of downsizing by Fortune 500 companies came crashing down on our unprotected heads.
In the preface to the ninth edition of Inc. Yourself, I mentioned Raytheon’s announced layoff of 10,000 workers, AT&T’s announced cut of 19,000 employees, Boeing’s of 20,000, and Compaq’s and Motorola’s of 17,000 each.
But now these numbers seem trivial, thanks to the blowup of the housing bubble and the subsequent financial near-collapse of 2008–2009.
In “The Layoff Kings” (August 2010), author Douglas McIntyre writes: “Between December 2007 (when the recession officially begun) and last month, more than 8 million Americans have lost their jobs, according to the government. Of these job losses, 700,000 stem from layoffs at just 25 companies, according to 24/7 Wall Street’s analysis of data from employment consulting firm Challenger, Gray & Christmas.”
“Downsizing” and “rightsizing” have been replaced by a new euphemism: “streamlining.” Whatever the shibboleth, corporate restructuring over the past 25 years has cost Americans more than 20 million jobs. And, for the first time in U.S. history, more executives, managers, and professionals have lost their jobs than blue-collar workers, which may explain the 38 million home-based businesses (U.S. 2010 Census).
Welcome to the Age of the Accidental Entrepreneur! People just a few years older than the baby boomers, who started working for major corporations or organizations in the 1960s or 1970s, were led to believe that as long as they did pretty good work, they had guaranteed jobs and periodic promotions. The last 25 years have proved the falsity of that corporate fairytale. Now no one is safe—neither executive vice presidents, nor tenured professors. Long-term unemployment is at an 80-year high, according to some pundits. Whereas hundreds of thousands of 20- to-30-year-olds have lost their jobs, people in their 40s and 50s have been especially hard hit. Many search for new jobs for more than a year. Where only a generation ago corporate employment was safe and entrepreneurism was hazardous, now it is clear that the risks are reversed. However, the rewards were always greater in entrepreneuring!
Confronting the “glass ceiling”—or simply needing more time for child rearing—has forced many women and minorities into starting their own businesses.
Fortunately, the proliferation of affordable portable office technology has made it possible for many entrepreneurs to work at home. The trend has become so great that a new acronym has arisen: SOHO (Small Office/Home Office). Magazines such as Entrepreneur, Success, and Home Business have sprung up, as have powerful micro- and small-business advocacy organizations such as the National Federation of Independent Business (350,000 members), National Association for the Self-Employed (more than 350,000 members), and the National Association of Women Business Owners. In Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live, author Daniel H. Pink calls this phenomenon “Digital Marxism”; inexpensive, portable technology lets workers now own the means of production.
The article “Key Statistics on the Growing Home-Based Business Market” in the March 2010 issue of Home Business magazine states: “The number of home-based businesses ranges up to 38 million, depending on who is doing the counting (U.S. Census Statistics). According to the U.S. Bureau of Labor Statistics, the number of home-based businesses exceeds 18.3 million businesses.”
All this may explain the dramatic rise in the number of corporations formed in the United States during the past 12 years: since 2002, more than 10 million new corporations were registered.
Many states have responded swiftly to the twin forces of massive Fortune 500 layoffs and the upsurge in entrepreneurism. In California, 1.9 million corporations and LLCs were registered since the 10th edition of Inc. Yourself was published in 2002; in Texas, 1.07 million.
The U.S. Chamber of Commerce recently ranked the 10 best states for entrepreneurship and innovation, measured by the number of hightech businesses, programs supporting entrepreneurs, and Science, Technology, Engineering, and Math (STEM) job concentration. Each state in the list offered a unique program for entrepreneurs:
1. Maryland.
2. Colorado.
3. Virginia.
4. Utah.
5. Massachusetts.
6. Texas.
7. Washington.
8. Arizona.
9. Georgia.
10. Florida.
So, welcome to the 11th edition of Inc. Yourself: How to Profit by Setting Up Your Own Corporation. When I first wrote Inc. Yourself, 37 years and 700,000 copies ago, the decision to incorporate was a fairly simple one to make.
It isn’t anymore.
The past decade has produced major tax legislation that has impacted individuals and small businesses:
• 2001—Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).
• 2003—Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).
• 2010—Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010; Patient Protection and Affordable Care Act of 2010 (“Obamacare”).
• 2012—American Taxpayer Relief Act of 2012.
Many of the changes have benefited small corporations. IRS tax tables show that tax rates for most small corporations have been lowered, as shown here:
|
1981 |
2012 |
Under $25,000 |
17% |
15% |
$25,001–$50,000 |
20% |
15% |
$50,001–$75,000 |
30% |
25% |
A corporation whose net income was $50,000 would have paid $9,250 in federal income taxes in 1981, but only $7,500 in 2012—a decrease of 19 percent.
Only for personal service corporations in the following professions was the corporate rate boosted to a flat 35 percent by the Revenue Act of 1987: “...health, law, engineering, architecture, accounting, actuarial science, performing arts or consulting....” (Internal Revenue Code §448).
For individuals in these fields, it still may pay to Inc. Yourself. By using an S corporation, they can enjoy the legal and business status of a corporation while being taxed at what may be a slightly lower individual rate.
Clearly, there are many compelling business and tax reasons to Inc. Yourself. This book will help you make the right decision.