State Law

Explaining (in Part) The Decrease In Business Start Ups In Connecticut for 2008

By Ryan

by Ryan McKeen 1/29/2009

Yet even that number, economists said, may be just a cloud. The total number of businesses to start in Connecticut last year ? 27,483 ? is still 11 percent lower than the number of those that started up in 2007. The data were released Wednesday by Secretary of the State Susan Bysiewicz. Hartford Courtant, 1/29/2009

The article quoted above details how unemployment doesn’t track business openings and closings data in Connecticut. If it did, we’d be in more trouble than we are now.

The increase in closures of businesses and the lack of new business filings is likely directly related to the real estate market.

For a number of reasons, investors incorporate when they purchase investment properties. These companies often do little other than hold title to real property.

Prior to the real estate bubble bursting,  a number of those investors borrowed heavily to purchase investment properties. When they couldn’t make payments, the properties were foreclosed and the company that was formed to hold the property no longer had a reason for existing. Hence, an increase in the number of dissolutions filed with the Secretary of State. Better to dissolve than pay the annual entity tax.

Why the decrease in the number of companies being created in Connecticut? Real estate investment has slowed. If investors aren’t buy properties then there’s no need to form a company related to the purchase of a property.

At least in part, the reason job losses don’t track corporate filings is that a lot of companies both created and dissolved in Connecticut do not have any employees.

Full post as published by A Connecticut Law Blog on January 29, 2009 (boomark / email).