Uber has never once turned a profit, and is allowed to continue running their business. If you’re a small business owner running an ebay or ecom business, and you claim losses for 3 out of 5 years in a row, it’s likely that the IRS will audit you, and could deem you a hobby. Amazon is often cited as not generating a profit for many years, but is now profitable. For them, it was somehow okay to run a business making no profit! So like, how come small businesses can’t claim losses, but big corps can?

  • Skull giver@popplesburger.hilciferous.nl
    8·
    18 days ago

    For some companies, the money all comes in from investors. That’s why YouTube was almost ad free for years, why Twitter was ad free for years, basically every online service you use is free because someone pumped investor money into it. Uber took up billions to blow out any normal sort of competition and then started bleeding everyone dry once there was no alternative. For an investor, that’s a risky bet, but one that could multiply your wealth.

    There’s a risk to this approach. Once investors stop coming in, you need to be sustainable, or your millions will evaporate. That’s how Tumblr managed to grow and grow until they got acquired for more than it was worth (though banning porn didn’t help). It’s also why streaming services, cloud services, subscription services, and almost every other type of “services” gets worse after a while. The internet likes to call this “enshittification” but the great deal you were getting a couple of years ago never made any monetary sense and anyone who has looked into the normal costs these businesses face saw this coming from miles away. When the investors stop pumping, you need to make money, and that means either ads, paid subscriptions, or a combination of both if consumers don’t want to pay for the full amount you need to keep the business afloat.

    As for the hobby designation: if you’re employing thousands, the IRS won’t call your business a hobby, even if you’re making a loss.

    I doubt Amazon is still running at a loss, though. I think they’re just using accountancy tricks to fake expenses so they don’t need to pay any taxes. That’s technically possible for smaller companies too, just not worth it most of the time.

    Every company needs to deal with the law, but it’s a lot easier to deal with the law if you can afford a couple of people to dig through the books and figure out the cheapest way to run your business. How do you pay for that? Investor money, of course!

    In theory you could separate a business into its trademark, put that in another company in a different country, then license back the trademark for a bit over your expected revenue over the year to pay a minimal amount of taxes on the profit. In practice, you need to stay up to date on the law in every jurisdiction you touch, make sure to change countries when the laws start shifting, and of course file taxes on all the redirected money flows with every tax agency. This takes a couple of accountants maybe a week or two per year for middle-sized companies, and they’ll take a whole lot of zeroes to do the job. For a small company, that’s unaffordable, but when it saves you millions to billions…

    That’s just one example. There are so many more. Picking the right city to incorporate in could already make a difference if your country allows that level of granularity in terms of tax law.