There are now a handful of companies offering what are called "human capital contracts" or "income-share arrangements" to normal people. These contracts don't involve actual stocks, but they have stocklike characteristics. People who sign up for these programs agree to give a percentage of their income to their financial backers for a period of several years, in exchange for a one-time cash infusion. It's a sort of Kickstarter for people, a crowd-funding platform that provides backers with monthly royalty checks instead of signed T-shirts.Take Upstart for example. Individuals share there story and experience on the site, along with their future goals and intended use of an investment -- anything from starting a craft beer business to paying off student loans. Then Upstart uses a statistical model to predict the individual's future earnings and determine a funding rate that the individual can raise for every 1 percent of income they share with backers. Individuals are then able to seek out cash infusions from backers in exchange for as much as seven percent of their annual income for five to 10 years.
The rise of people acting like businesses
— By Tyler Falk on November 20, 2013, 2:42 PM PST
I wonder what the tax implications are of this. Are my "dividends" paid out of the pre-tax or after-tax income of the individual I am investing in? Noting the nature of our highly (and getting ever much more so) progressive income tax, I'm not sure the returns would be what most people would expect.
And unlike corporations, which can theoretically last forever, the productive life of individuals is usually limited, especially in sports. (Remember what "NFL" stands for: "Not For Long") So in theory, the "book value" of my investment in an individual actually depreciates over time. Can I deduct this depreciation on my income taxes as I can for other long-term assets?
Then there is the moral hazard: If I can get a large sum of money up-front for speculative future performance, does that not encourage me to perform more conservatively or or even lackadaisically than I might otherwise behave? Individuals are different than traditional corporations in that a traditional corporation is made up of many people with their own self-interests which are usually bound to the long-term profitability of the firm.
Do pick up <i>The Incorporated Man</i> for a look at a society built on this. It's Science Fiction, of course. Right?