Recessions for the Self Employed |
Posted: May 27, 2020 |
During times of recession, like in 2020, employed W-2 workers are impacted differently than independent contractors and self-employed workers. It has been shown that recessions cause an uptick in self-employed people. The UK showed an increase of nearly 10% since the start of an economic downturn in 2012. This would make sense since many people get laid off and bring skills from the workplace into a freelance or entrepreneurial setting. Recessions and entrepreneurs have a complicated relationship of both positive and negative. Entrepreneurs are more easily able to pivot and solve problems provided by a recession but they usually have more limited resources and cash reserves Recessions also cause a rise in part-time and temporary jobs because businesses are trying to cut costs as much as possible and this is an effective way to do so.
There are a few things that a recession does well for a self-employed entrepreneur. There are several tax breaks and benefits that the government affords to entrepreneurs. The government has a problem of giving people a job, if you own a company and employ people, the government has several solutions to make that simpler for them. While most individuals may receive a stimulus check. Small businesses are afforded a huge benefit of things like the PPP loan. Which covers several weeks of payroll and employee benefits that is easily forgiven. Loans are readily given to businesses and simple personal loans for entrepreneurs
There are also some ways that an entrepreneur is impacted worse in a recession. Self-employment can get significantly more difficult when it comes to taxes. Since most businesses have this game of write offs, deductions and a small sea of paperwork required. It is just a little bit stickier. Since many small businesses usually have less income than bigger business so even a slight dip in revenue can be detrimental. This is one of the major reasons that many small businesses go under within the first five years.
Regarding recessions, anyone can make it through better and more capable than before, but it takes a doubled down amount of hard work and smart work.
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