it261: Number of U.S. Nonemployer Businesses Continued to Grow in 2018

Wednesday, 27 May 2020

Number of U.S. Nonemployer Businesses Continued to Grow in 2018

According to the U.S. Census, the number of nonemployer small businesses increased to 26,485,532 in 2018, up 3% from 2017.

Nonemployers are businesses that have an owner but don't have paid traditional full or part-time employees (W2 employees).

The data comes from tax records and you can think of nonemployers as solopreneur businesses (some exceptions apply - see below). The data includes anyone reporting $1,000 or more in self-employment income, so it includes a lot of part-time businesses.

From 2010 to 2018 the number of nonemployer businesses has grown at an average annual rate of 2.53%. This is a bit more than 3 times the growth rate in traditional employment.

Nonemployers are businesses that have an owner but don't have paid traditional full or part-time employees (W2 employees). The data comes from tax records.

One of the more interesting nonemployer data sub-trends is that the number high earning nonemployers - those who report earning revenue of $100,000 or more per year - is one of the fastest growing segments.

Higher earners have been growing at an average annual rate of 3.7% between 2010 and 2018 and reached 3.1 million in 2018.

The Forbes article Growth Of Million-Dollar, One-Person Businesses Accelerates goes into detail on an even higher earning segment - those reporting revenue of $1 million plus. Key quote:

The number of nonemployer firms—those with no employees except the owners— that hit $1-$2.49 million in revenue in 2018 rose to 41,666 in 2018, according to just-released Census data, up from 39,494 in 2017 and up from 26,744 in 2011—a nearly 48% increase.

Nonemployer data gets less attention than other government data on self-employment.

This is because the dataset is messy and includes a hodgepodge of business entities - passive businesses, firms no longer in business, LLCs owned by major corporations, etc. - that aren't active solopreneur businesses.

But despite these issues, we find the nonemployer data to be a useful indicator of the overall size and growth of U.S. self-employment.