It may surprise you that business formation across the United States soared unexpectedly during the second half of 2020, amidst quarantine lockdowns and rising COVID-19 deaths. This is in stark contrast to what usually happens during recessions and what most economists assumed would happen during the COVID-19 pandemic.
Typically, the average American’s spending activity drastically decreases during recessions. Entrepreneurship historically nosedives along with this, since individuals have less spending latitude and financial institutions are less likely to give loans at favorable rates when economic times are not favorable.
However, one of the biggest differences between the Great Recession of 2008 and the COVID-19 pandemic is the government response to it. In contrast to 2008, the government provided trillions of dollars to average American families during the pandemic. The resulting stimulus checks and pandemic unemployment payments helped America's middle class continue to spend money throughout the economic downturn
Additionally, most of the wealthier white collar workers were able to continue working remotely. In these households, many experienced a higher amount of disposable income than normal due to not being able to spend money on going out or having to pay for gas.
The ease of doing business
In terms of entrepreneurism, the pandemic provided a unique playing field. Essentially, even though unemployment rose sharply between March and April of 2020, the recovery was much faster as compared to the Great Recession. In 2020, government dollars and the ability for white-collar workers to work at home produced a population that had spending means that were roughly the same as pre-pandemic, and in some cases surpassed pre-pandemic levels.
So not only did the customer base continue to exist in spite of COVID-19 restrictions and deaths, the rise in telework also made it much easier for potential entrepreneurs to reach out to others. To a large extent, the world transitioning online for work made geography even less of a barrier than it was prior. With no ability to meet in-person, it did not matter if a particular vendor were next door or across the world. Either way, the meeting would take place on Zoom.
Taking care of business the right way
If you are an entrepreneur riding the unexpected waves of COVID-19, remember that many business protocols still exist during these turbulent times. For instance, if you are starting a business, you should remember to have it formally incorporated.
Even though times are strange, you do not want to be liable for any deaths or losses your business accumulates. Incorporating your business often allows you to limit your liability to the money that you personally invest in your business. Properly incorporating your business protects your other personal assets like your house and car from liability.
Depending on your business’ needs, you may benefit from forming an LLC for a corporation. Which one is right for you depends largely on the structure of your business and what kind of tax structure would benefit you best. Contact us at AmeriEstate today to properly incorporate your business