Frankly An Editorial

The Quad State region is under crisis.

America is under crisis.

The crisis is the lack of business formation–not only in the Quad State region, but in American in general.

Yet this is more than a job for any business group, an economic development authority or a local chamber of commerce.

It’s a job we all must be involved in to right the business ship of state–again, not only in our Quad State region, but in America as well.

Business Formation Crisis Coming Home to Roost

Business Formation Crisis Coming Home to Roost

Huge Drop In Corporate Formation Accelerates from 2006

I appreciate the Tax Foundation for their study (see link below) for supplying the facts for this posting.

We are now all paying the price for it. You can look at the macro factors from 2006.

Now my friends from the proverbial ‘other side of the isle’ are quick to point out, “Well, who was in the White House in 2006…”

It’s a nice try. What we really need to do if we’re looking to address this issue in a macro economic sense is see what party took over both houses of Congress in 2006.

But more than that–no matter which party you favor–there is an 800-pound gorilla staring at us as the culprit.

Look at the HUGE increase in business regulation that took a tremendous jump starting in 2009. There’s the crux of the matter which would allow us to get at the root cause of our business formation issue.

The Fewest Number of Corporations in 40 Years

Recently released IRS data shows that there were 1.6 million C corporations in 2011. This is the lowest number of traditional corporations since 1974 and 1 million fewer than there were at the peak in 1986. In other words, in every year since 1986, roughly 40,000 U.S. corporations have disappeared from the tax rolls. However, the losses have accelerated since 2006 to a rate of about 60,000 per year.

We urge QSBJ readers to check out the Tax Foundation link below.

Our Quad State area has some very solid economic development leaders who are doing their job in a commendable way to bring jobs to our counties. But there still needs to be more of an involvement by all of is in the rank and file of business development.

Sole Proprietorship Formation Also Hits Tough Sledding

Sole proprietorships can be the flagship to recovery. But 23 million sole props in 2011 (most recent IRS year) are not shown in the above graph because their function is not comparable to the pass-through business tax to, say, C Corporations.

Also not shown in the graph are real estate investment trusts (REITs), which have recently become a popular way for C corporations to remove assets from the corporate tax code–all legally mind you.

REITs were originally intended for real estate projects, such as shopping malls, but they are now used by a variety of industries, including hotels, casinos, and hospitals, to the double taxation whammy that the IRS levies. Some larger corporations actually use this gambit to spin off a division as a REIT.

The REIT may become a taxation strategy as time goes on.  We will have to see what comes from the new Congress. Currently there are less than 20,000 of these REIT strategies employed by companies but it is a category that is growing rapidly.

Depending on what the new Congress does, there may be a huge uptick in this strategy in the months and years just ahead.

This just may be the time you can encourage that niece or nephew, grandson or granddaughter to launch that business idea here in our region.

We have some outstanding business coaches and consultants in our Quad State area. Is it time to pick up the phone and have a chat about what you can do, personally, in business formation?


For further reading:


About Steve Lanning

Steve Lanning is a nationally recognized entrepreneur who has been creating his own paycheck since 1975 and loves to help others do likewise. As the founder of both the National Association of Business Coaches (sold in 2002) and the Consultants National Resource Center (for all marketers of professional services), he and his family have lived in three of the four states in our Quad State region. His passion is to see individuals and small businesses, start-ups to mature, discover and promote their strengths in building revenue streams individually, that, collectively, make for a strong region as reported on and celebrated by the Quad State Business Journal. He can be contacted at

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