Selfies, coffee-obsessed, social media-savvy… Just a couple of stereotypical words that sum up the millennial generation. But what about entrepreneur? According to Forbes, millennials are starting their businesses earlier than boomers ever did. By just how much?
The average age for new millennial business owners is 27 while boomers normally opened shop around age 35 (just eight years older than your standard Gen Yer). Now younger age does not guarantee millennials more (or less) financial security or success, but it does give a glimpse how Gen Y values the workplace: it comes as no surprise that, according to USA Today, a study reveals millennials in their twenties and thirties are more stir-crazy about starting their new companies, trusting themselves for their own security than others.
With starting business owners now younger than ever and many millennials joining the ranks of the employed — (in 2016, millennials ranged in age from 20 to 36) — it is safe to say Gen Y is changing the way we do business. But it goes beyond social media use and a reliance on coffee (fun fact: coffee demand increased by 1.5 points in 2016 thanks to millennials who consume roughly 44% of the brew).
How are millennials affecting business entity trends? Better yet, are they? What business structure are millennial business owners registering as? Read on to find out (plus learn why you need to conduct a North Carolina secretary of state business search.)
1. Sole Proprietorships Still Stand Strong
In 2014, a whopping three-quarters of American businesses were sole proprietorships. And, the following year (2015) the IRS reported more sole proprietorship activity, try 2.4% up from 2014. Now that many millennials have started working— and many are well into their careers — we can safely assume Gen Y hasn’t hindered sole proprietorship growth. In fact, they may have helped. According to Forbes, millennials launch nearly twice as many businesses as boomers have.
The Safe Bet: Millennials Probably Are Embracing Sole Proprietorships
Combine this with the mindset that more than half (61%) of millennials think they are more financially stable as business owners than when working for a company (as mentioned earlier), and it makes sense why small business ventures aren’t going anywhere. That’s not to say millennials aren’t registering as LLCs or corporations; thanks to the easy setup and less financial startup costs, many millennials probably first test the waters as a sole proprietorship; then when profits increase, they transition over to another business entity that has better tax benefits.
Entrepreneurial Parents Pave the Way?
Plus, most millennials (surprisingly?) aren’t new to the entrepreneurial game; in fact, many have one or both entrepreneurial parents — only 22% of Gen Y entrepreneurs are in unfamiliar territory as first-generation entrepreneurs (as Fortune states). Perhaps since sole proprietorships are the most common business entity, millennials saw their parents work as sole proprietors and decided to follow suit?
2. B Corporations Could Gain Traction Thanks to Millennial Values
As of 2007, the business world welcomed a new corporate entity into the mix: meet the B corporation. Unlike its S and C corporation cousins, according to Harvard Business Review, the B corporation primarily focuses on community, environment, and employees (S and C corporations focus more on the shareholders).
In other words, it bridges the corporate gap between business and social impact, making it an attractive option for millennials, many of whom have more social goals than their parents’ generation (according to Entrepreneur, social values viewed as “very important” or “essential” rose a staggering 10.6% over 35 years (from 1977 to 2012; speaking of social values, also more than half of millennials considered raising a family as “very important” or “essential”).
That said, while there are already over 1,000 corporations awarded B Corp-status across 50 countries, don’t be surprised to see this number rise as more millennials — and Generation Z who value changing the world for the better —start businesses.
3. LLCs, Perhaps?
As Fortune mentions, although still pursuing traditional paths like accounting and law, millennials are also branching out into other sectors such as e-commerce, retail, and — let’s not forget — technology, which, in 2017, increased to a whopping 7.3 million jobs. What does this have to do with LLCs?
Tech startups generally need outside funding; while in the past, most chose the corporate route and exchanged VC investors stock for funds, LLCs have become popular, thanks to its easy setup and some corporate benefits like liability protection — not to mention, it is another option for VC funding that, while trickier and often not as appealing as C corporations, usually is more preferable than sole proprietorships even though both cannot offer stock.
(Side note: originally, Basecamp founder, Jason Fried did not have outside funding so not all tech startups need outside funding to thrive.) Long story short, expect to see millennials running LLCs, tech companies included.
Final Thoughts: Will Gen Z Entrepreneurs Make Waves or Follow in Millennial Footsteps?
From bridging social values with business to running more businesses at a younger age, millennials are proving they aren’t like boomers (much less their Gen Z parents). But does that mean Gen Z (or Pivotals), the next generation, will follow in millennials’ entrepreneurial footsteps?
Yes and no.
Gen Z, like millennials, have an entrepreneurial spirit and care about social issues (so B corporations could skyrocket?). But… Due to sky-high tuition and seeing how much student debt millennials face (57% of millennials below 30 consider student debt a big problem), entrepreneurial Pivotals may say no to college. Then again, with Gen Z still in their teens and tweens, we will have to see. Until then, what business entity trends do you think Gen Z business owners will choose? Leave a comment.
Want to Conduct a North Carolina Secretary of State Business Search?
Or what about a New Mexico or Texas business name availability search? Perhaps a South Carolina corporation search? If so, Sec States, an easy-to-use database of secretary of state pages, can help. Within a couple of clicks, access multiple business pages across states’ websites.