Every day across America, countless individuals realize their dream of business ownership and open their own small business. According to the Small Business Administration, in 2011 (the last year for which figures are available), approximately 800,000 small businesses opened across America. The chart below shows how many businesses opened (births) and how many closed (deaths).
According to the same report, 94% of nonemployers in 2011 were sole proprietors or partnerships. Small business owners who chose a corporate structure overwhelmingly chose the S corporation.
What can small business owners and entrepreneurs take away from this data?
First, entrepreneurship is thriving! Although the number of new business births is down from its peak in 2006, it’s up over the last two years, a positive sign. The economic recovery may be slow, but it’s steady, and with steadiness comes confidence in the economy and in businesses. That confidence encourages investment in businesses and the sale of goods and services – two things which small businesses need to survive and thrive.
If you’re thinking of starting a small business and you plan to work on it by yourself, then a sole proprietorship may be the easiest and fastest route to get started. Remember that “sole proprietorship” is a tax designation; you can hire employees along the way as your business grows.
If you’d prefer a corporate structure for your startup business in order to better protect your personal assets, then an S-corporation can be a good choice. S-corporations are taxed at the personal rate, which many people prefer.
Home-based businesses continue to hold steady, with about 52% of all new businesses each year a home-based business. Construction and even retail businesses are run as home-based businesses, and technology has made it easier than ever to serve customers nationally and even internationally from a home office.
The previously cited chart comes from the April 2014 Small Business Advocate, published by the Small Business Administration.
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