LLCs boom in Tennessee; what does this portend about the economy and the meaning of employment statistics?
J. Holly Dolloff writes in the Nashville Business Journal: “Boom times ahead? LLC formations soar”
It is likely that this article describes a trend seen in many other states besides Tennessee, and one worth watching. LLCs, or limited liability companies, are a relatively new form of business organization providing the legal protection of a corporation, without some of its cumbersome requirements. It has been frequently used by doctors, lawyers, and other professionals to organize their practices, and now apparently is being used more widely by business startups
The formation of limited liability companies in Tennessee has soared over the past two years, a trend that could mean the region’s bleak jobs picture may soon brighten considerably.
The Tennessee Secretary of State Division of Business Services registered . . . 49 percent more than in 2001 [and] more than double the number of 1995, when companies first gained that option from the state. . . .“The LLC has come into its own,” says Leigh Griffith, an attorney at Waller Lansden Dortch & Davis. “It’s the entity of choice for closely held companies.”
Total for-profit business formation also set a new high . . . up 22 percent from 2001.
Griffith speculates the 2003 boom may have resulted from the downturn that began in 2001. “As the economy gets softer, people get laid off and start their own businesses,” he says. . .
Though their greater numbers may often be attributable to past bad news, new LLCs could end up improving the local and state economic picture as they grow into bona fide businesses with multiple employees.
At this point, it is very unlikely that many of the new companies are being counted in the local or state economic statistics that show a stagnant job market despite optimism from both consumers and business owners.
At present, the only workers utilized by such new businesses may be the owners, who will not be reflected as employees in the payroll survey relied on for the disappointing employment statistics, although they may report themselves as employed or self-employed in the household survey which yields the somewhat more encouraging unemployment numbers. See this post — What’s going on with the employment data?
