More Than 380,000 Nonemployer Businesses Added to the U.S. Economy

The number of businesses without paid employees in the U.S. rose 1.7 percent to 22.5 million in 2011, according to a new report released today from the U.S. Census Bureau. 

This marked the second straight increase in nonemployer businesses, with all but two states (Louisiana and New Hampshire) posting gains from 2010 to 2011.

Today’s findings come from Nonemployer Statistics: 2011, an annual report on U.S. businesses without paid employees, classified in nearly 450 industries for the nation, states, counties and metropolitan areas.

Nonemployer Statistics covers businesses with no paid employees, annual business receipts of $1,000 or more ($1 or more in the construction industries) and subject to federal income taxes.

Businesses with paid employees were covered in County Business Patterns, which was released in April.

“Approximately 75 percent of all U.S. business locations are nonemployer businesses,” said William Bostic Jr., associate director for economic programs at the U.S. Census Bureau. “These statistics provide the only source of information on the total number of establishments and receipts at the local level for this important component of our nation’s economy.”

This release covers 19.4 million sole proprietorships, 1.4 million corporations and 1.6 million partnerships, which together make up the total number of nonemployer businesses.

At the state level, California had the largest increase in the number of nonemployer businesses, with 72,605 added in 2011. The states with the next highest increases in the number of businesses were Texas (41,148), Florida (31,485) and New York (21,119).

Among the 50 counties with the largest number of nonemployer businesses, Los Angeles County, Calif., added the most nonemployer businesses (28,651). Other large increases were in Cook County, Ill. (11,705), Maricopa County, Ariz. (10,038) and Kings County, N.Y. (Brooklyn) with 8,455.

Among industry sectors, services that compromise the “other services” (except public administration) sector gained the largest number of establishments, adding 159,163 in 2011, an increase of 4.7 percent. Types of services that fall within this sector include automotive repair and maintenance, barbershops, beauty salons, laundries and dry cleaners.

The number of nonemployer businesses declined in only two sectors. The construction sector lost 36,262 establishments (1.5 percent), while the finance and insurance sector lost 3,088 establishments (0.4 percent).

Other highlights:

--Total annual receipts for nonemployer businesses were $989.6 billion in 2011, an increase of $38.8 billion (4.1 percent) from the previous year.

--The District of Columbia had the highest percent increase in the number of nonemployer businesses, up 7.2 percent, followed by North Dakota (4.3 percent), Arizona (3.2 percent) and Delaware (2.9 percent).

--North Dakota reported the highest percentage increase in receipts in 2011, up 13.2 percent to $2.3 billion.

--California had the largest dollar increase in nonemployer receipts, adding $5.5 billion for a state total of $143.8 billion in 2011.

--Among the 50 counties with the largest number of nonemployer businesses, Brooklyn had the highest percentage increase in receipts, rising 7.8 percent in 2011. Orange County, Fla., increased 6.8 percent and Harris County, Texas, followed with an increase of 6.6 percent.

Nonemployer statistics originate from tax return information of the Internal Revenue Service. The data are subject to nonsampling error such as errors of self-classification by industry on tax forms, as well as errors of response, nonreporting and coverage. Values provided by each firm are slightly modified to protect the respondent's confidentiality. Further information about methodology and data limitations is available at http://www.census.gov/econ/nonemployer/methodology.htm

Original content +Bob DeMarco , All American Investor