Underground Economy Business: How to Start One And Why Not To

CMA Statement

(Cover My …Rear end)

This article discusses underground economy subjects that may be illegal. The author does not encourage illegal activities or condone them. The information is presented for educational or entertainment purposes only. You may wish to consult an attorney or accountant.

(Then again…)

Stay Out of Trouble

We go into more detail than you might want, but we are trying to keep you out of trouble. You see, in most countries some underground economy types of businesses are illegal and if you get caught, you could end up fined, in jail or dead (China and some Arab countries get pretty mean). These businesses offer bigger rewards, but the risks are higher.

What is the Underground Economy?

The underground economy refers to businesses and business activities that are not reported to government systems. They are also called by other names, including; black market, shadow, unreported, illegal and others. But it also refers to simple little extra cash activities that people all around you are doing.

These businesses, if they don't report to the government, escape rules and regulations, taxation and enforcement penalties. Governments and some honest, law-abiding citizens do not like these business operations. In general, as governments become more oppressive with taxes and regulations, people get more creative in running their businesses: in many cases, these business activities expand as government taxes and regulations increase. For example, as the costs of maintaining normal, legal workers increases, due to government regulations, some employers look for ways to skirt the oppressive regulations and taxes.

Businesses may hire more independent contractors to do the work of regular employees, thus saving on various employer taxes. However, beyond that, some employers may hire some workers "under the table." This often leads to the employer resorting to under reporting sales and profit figures. I've seen it happen in many kinds of businesses, usually small family businesses like auto mechanics, bars, restaurants and even some medical practices.

Types of Underground Economy Operations

There are three basic types of underground operations:

  1. Illegal activities, such as drug dealing or gun trafficking
  2. Unreported activities, like under reporting sales or profit figures (what some call skimming) in a normal reported business or perhaps "border trade," which may include transporting cigarettes from a low tax state (South Carolina) to a high tax state (New York)
  3. Informal activities, like the corner burrito vendor or many unlicensed lawn mowing operations or unlicensed taxicab services.

Don't say I didn't warn you.

The tax man is out to get you if you try to cheat on your taxes. They look for cash businesses like dry cleaners, bars and restaurants and they find ways to calculate what they think you are hiding. In many cases, if you aren't too greedy, you can get away with small amounts of money. Don't start showing off, though.

Flying under the Radar

The businesses that the tax man is looking for are usually somewhat visible, with visible tangible assets or inventory movements that can be evaluated with a dollar amount. For example, If a liquor store has $100,000 in inventory on the shelves and a liquor license that cost $100,000, an owner who reports a profit of $22,000 will probably be audited.

A self-employed hair stylist who reports an income of $16,000 but drives a $70,000 BMW and lives in a $2500 a month apartment is asking for trouble; especially if her appointment book, full of appointments, is in plain view for a tax man to see.

Got the idea?

Are you ready for the list of underground economy businesses?

Now that you've read the warnings and other boring stuff, you probably are ready to see a list. The list that follows is not by any means complete. That's because there are thousands of little businesses that people start every day; people just like you. In fact, most of these underground economy guys have many of these businesses going at any one time. It's harder for a tax man to keep up with someone with 10 little "tasks" going on and who doesn't attract attention with a showy or loud lifestyle.

Okay enough with the warnings. Here are a few examples of underground economy businesses, or extra cash activities, each of which can be run out of your home, or even just from your cell phone; each of these can be modified into several more examples:

  1. Unlicensed taxi or car service
  2. Trash removal service
  3. Home landscaping business – lawn mowing, shrubs, water features
  4. Delivery service
  5. Shopping service
  6. Panhandler
  7. Burrito vendor (or hot dogs, popcorn, corn on the cob…)
  8. Home cleaning services
  9. House painter
  10. Home handyman
  11. Photographer - child or pet photography
  12. In-home massage therapist
  13. Cupcakes for cash
  14. Private chef service
  15. Personal trainer
  16. Chair Massage in select locations
  17. Web Design
  18. Computer training
  19. Tutoring
  20. Resume writing
  21. Babysitting/childcare
  22. Meal preparation and delivery
  23. Auto detailing – pick-up and delivery
  24. Hair care (also nail care, etc.)
  25. Catering
  26. Party planning
  27. Hypnosis therapist
  28. Personal organizer
  29. Home cooking instructor
  30. Pet grooming

Okay, that should get your creative entrepreneur juices started. You should be able to look at that list and come up with at least 50 or 60 more; for example, we didn’t mention crafts and craft fairs or a bunch of car or pet ideas. Plus, there are more ideas scattered around this web site.

What you are really looking for are a few businesses that you can start, with your own talents, personality and temperament.

Many well-known entrepreneurs got started by using underground economy methods. They raised enough money to go then start their more well-known businesses, which turned them into wealthy business owners.

The real secret to success is this: Get started today, doing something. Today's experience will lead to tomorrow's success.

Now, there is no reason you couldn't run any of these as legitimate, tax paying businesses (especially when some customers pay by check). Of course you might then miss the excitement of running from the tax man.

In order to make it easier for you to get started quickly, we've listed resources below for five easy-to-start but profitable businesses or extra cash activities. One of them could work for you; they are already working for thousands of people just like you. Choose one now and get your creativity working for you, so you can finally start making money from your own business. 

Resources for five easy-to-start but profitable businesses or extra cash opportunities

1. Catering Business: If you are interested in learning everything there is to know about starting a catering business, or just doing a bit of catering on the side, then this is going to be the most important information you'll ever read... Find out more

2. Photography Business: You don't have to purchase expensive equipment, lease a studio or get a loan. If you already know how to take good pictures, a profitable photography business can be achieved on a very, very low budget and in some cases, in as little as two weeks. Find out more

3. Resume Writing Business FACT: There are more job seekers on the job market than ever before. If you've considered starting a resume-writing business, there's no better time to start than now!!! Find out more

4. Is a Gourmet Dog Treat bakery the right business for you? The gourmet dog treats business is fun and profitable; many people are doing it, but it's not right for everyone - like people who don't like dogs. Find out more

5. Turning Cupcakes Into Cash – How To Start a Cupcake Business From Home. This is another extra cash opportunity that people just like you are doing. Find out more

Another Resource

We've just published a new report on the Underground Economy. It is a Kindle publication on Amazon.com. It's cheap, but it is more extensive than this page. It has helpful information for you if you want to be better prepared for what's coming down the pike. The publication is Underground Economy: Secrets for Your Financial Survival.

Life is pretty simple: You do some stuff. Most fails. Some works. You do more of what works. If it works big, others quickly copy it. Then you do something else. The trick is the doing something else.
Leonardo da Vinci

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