Small Business by the Numbers

How big is small business? Is entrepreneurship on the ascendency?

There is much conflicting information in the media. Here are some of the facts from or based on government sources:

All businesses in the U.S.

The Joint Committee on Taxation’s report on choice of entity found that the “vast majority” of businesses in the U.S. are sole proprietorships, with more than 22.6 million non-farm sole proprietorships in 2009 out of 33.6 million total business returns.

There were:

  • 1.7 million C corporations (some of which are mega-public companies)
  • 1.9 million farms
  • 3.1 million partnerships (which includes limited liability companies)
  • 4.1 million S corporations

The number of pass-through entities (businesses structured so that profits and losses are taxed on owners’ personal returns) has nearly tripled since 1987.

Startups

The SBA says that from 2007 to 2010, the rate of startups declined by 12%. In 2008, the startup rate fell below 3% in a quarter (compared with the previous quarter) for the first since tracking began in the 1990s. The latest startup rate for which data is available is 2.7% in the second quarter of 2011.

A Kauffman Foundation report found that new firms (less than five years old) were 35% of all companies in 2010 as compared with 49% in 1982.

States with the best business climates:

  • Small Business & Entrepreneurship Council Report found that South Dakota, Nevada, Texas, Wyoming, and South Carolina were the top five locations.
  • The Tax Foundation Report found that Wyoming, South Dakota, Nevada, Alaska, and Florida were the top five locations.

Bankruptcies

It appears that bankruptcy filings in federal court are on the wane. According to court statistics, there were 13% fewer filings for the 12-month period ending March 31, 2012, as compared with the previous 12-month period.

Comment on the numbers

Like a Georges Seurat painting, statistics create the broad picture of the state of business today. However, each little dot in the picture is a unique entity on which an owner has pinned his or her hopes, dreams, and financial resources.

Anecdotal stories that I hear from entrepreneurs around the country continue to show three main themes: strong desires to start a business, continued struggles to keep a company going, and, unfortunately, failures (folding a company, selling out, or going into bankruptcy).  There’s no single statistic that can capture the state of small business today.

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