It’s a record era for new business. The IRS received nearly 5.4 million business requests in 2021 – a spike since the US Census Bureau began producing the Business Formation Statistics report in 2004. The report showed that there were about 1 million more new business requests in 2021 than in 2020, which was also a record year.
The first half of 2022 is slightly behind last year, with 2.5 million applications through June, compared to 2.8 million in the same period last year. While growth may be slowing, entrepreneurs have still started more businesses recently than in previous years.
Small businesses employ just over half of the US workforce, so adding more of them could boost the economy and build more resilience. The real test, though, will be how many apps actually turn into a payroll business. Stacker analyzed data from the US Census Bureau’s Business Formation Statistics to investigate trends in new business applications, including timelines, industries, geographies, and the likelihood that they will grow to add jobs to the US economy. Stacker analyzed seasonally adjusted US data from 2004 to June 2022.
New business applications are on the rise
Recessions often spur new business ventures, but the growth of the pandemic-induced recession was far deeper than anything seen after the much longer 2008 recession. By perspective, it took from 2009 to 2016 (about seven years) for business apps to increase by 22%, while apps grew more than in 2020 and 2021.
Several factors drove this increase. Unprecedented layoffs in the spring of 2020 have led many people to seek new forms of income. To see also : Kimberly-Clark’s business-first approach to digital transformation. Rising unemployment benefits and pandemic stimulus checks meant people had more money to invest in their ideas and stay afloat while their new ventures gained traction. And for homeowners, a big rise in home values meant they had the opportunity to access additional seed capital.
In other words, entrepreneurs had the reasons and the resources to finally put their business ideas to the test.
Retail leads the way in applications
The newest business applications are in retail, which has led all industries since 2016.
Even as retail stores temporarily closed, shuttered their windows and laid off employees, many other potential retailers stepped in, according to Bureau of Labor Statistics data. To see also : Gartner research finds that most technology purchases come with a high level of regret. Many new retailers were sole proprietors — individuals who sold their own products primarily online — or were replacing stores that closed during the pandemic.
Additionally, some retail sub-categories have increased sales in 2020, including online stores, food and beverage stores, and hobby stores. Online shopping, in particular, gained immense popularity amid local restrictions on businesses and gatherings during COVID-19 peaks and has continued to increase sales since then, according to Census retail e-commerce quarterly reports.
In April, retail employment increased by 18% compared to the same month in 2020 and was even slightly higher than in April 2019, according to BLS data.
Transportation, warehousing, and retail grew applications most
Wyoming and Delaware remain leaders in business applications
Forklift
Retail was also among the leaders in business application growth between 2019 and 2021, but it did not expand as fast as shipping and warehousing. See the article : Psoriatic arthritis: lifestyle changes that help. The same reliance on online shopping that fueled new retail businesses also boosted shipping and warehousing because getting goods into people’s hands required a better pipeline.
The biggest growth occurred in unclassified businesses, which increased from approximately 52,000 to 144,000 orders.
Most of the country saw similar levels of new business applications per capita in 2021, with a few highlights. Wyoming was the most notable, with 58 requests per 1,000 people. Stacker has highlighted Wyoming’s leadership before, noting the state’s tax-friendly policies and an influx of out-of-state investment and new residents. The Wyoming Business Council has stated that its main industries include natural resources, tourism/outdoor recreation, and agriculture. But the council is also working to support new industries in the state, including professional services, technology and advanced manufacturing.
Delaware was just behind with 45 new business applications per 1,000 people. The number of companies incorporated in Delaware has exceeded 1 million, including more than two-thirds of the Fortune 500 companies. Incorporating in Delaware can take less than an hour, and the state offers a specialized corporate court to expedite business trials. Other leading states include Georgia (30 new business orders per 1,000 people) and Florida (29).
