CREAT: Census Research Exploration and Analysis Tool

Garage Entrepreneurs or just Self-Employed? An Investigation into Nonemployer Entrepreneurship

October 2024

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The 10 most similar working papers to the working paper 'Garage Entrepreneurs or just Self-Employed? An Investigation into Nonemployer Entrepreneurship' are listed below in order of similarity.

• Working Paper

  
  
  Just Passing Through: Characterizing U.S. Pass-Through Business Owners
  

  January 2017

  Authors: Kristin McCue, Nathan Goldschlag, J. Daniel Kim

  Working Paper Number:

  CES-17-69

  We investigate the use of administrative data on the owners of partnerships and S-corporations to develop new statistics that characterize business owners. Income from these types of entities is "passed through" to owners to be taxed on the owners' tax returns. The information returns associated with such pass-through entities (Form K1 records) make it possible to link individual owners to the businesses they own. These linkages can be leveraged to associate measures of the demographic and human capital characteristics of business owners with the characteristics of the businesses they own. This paper describes measurement issues associated with administrative records on these pass-through entities and their integration with other Census data products. In addition, we document a number of interesting trends in business ownership among pass-through entities. We show a substantial decline in both entry and exit with less churn among both owners and owned businesses. We also show that the owners of pass-through entities are older, more likely to be male, and more likely to be white compared to the working population.
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• Working Paper

  
  
  Startup Dynamics: Transitioning from Nonemployer Firms to Employer Firms, Survival, and Job Creation
  

  April 2025

  Authors: Alicia Robb, Adji Fatou Diagne

  Working Paper Number:

  CES-25-26

  Understanding the dynamics of startup businesses' growth, exit, and survival is crucial for fostering entrepreneurship. Among the nearly 30 million registered businesses in the United States, fewer than six million have employees beyond the business owners. This research addresses the gap in understanding which companies transition to employer businesses and the mechanisms behind this process. Job creation remains a critical concern for policymakers, researchers, and advocacy groups. This study aims to illuminate the transition from non-employer businesses to employer businesses and explore job creation by new startups. Leveraging newly available microdata from the U.S. Census Bureau, we seek to gain deeper insights into firm survival, job creation by startups, and the transition from non-employer to employer status.
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• Working Paper

  
  
  Business Owners and the Self-Employed: 33 Million (and Counting!)
  

  September 2025

  Authors: Kristin Sandusky, Martha Stinson, Henry Hyatt, Christopher Goetz, Zachary Kroff

  Working Paper Number:

  CES-25-60

  Entrepreneurs are known to be key drivers of economic growth, and the rise of online platforms and the broader 'gig economy' has led self-employment to surge in recent decades. Yet the young and small businesses associated with this activity are often absent from economic data. In this paper, we explore a novel longitudinal dataset that covers the owners of tens of millions of the smallest businesses: those without employees. We produce three new sets of statistics on the rapidly growing set of nonemployer businesses. First, we measure transitions between self-employment and wage and salary jobs. Second, we describe nonemployer business entry and exit, as well as transitions between legal form (e.g., sole proprietorship to S corporation). Finally, we link owners to their nonemployer businesses and examine the dynamics of business ownership.
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• Working Paper

  
  
  Nonemployer Statistics by Demographics (NES-D): Using Administrative and Census Records Data in Business Statistics
  

  January 2019

  Authors: Adela Luque, Renuka Bhaskar, James M. Noon, Kevin Rinz, Victoria Udalova

  Working Paper Number:

  CES-19-01

  The quinquennial Survey of Business Owners or SBO provided the only comprehensive source of information in the United States on employer and nonemployer businesses by the sex, race, ethnicity and veteran status of the business owners. The annual Nonemployer Statistics series (NES) provides establishment counts and receipts for nonemployers but contains no demographic information on the business owners. With the transition of the employer component of the SBO to the Annual Business Survey, the Nonemployer Statistics by Demographics series or NES-D represents the continuation of demographics estimates for nonemployer businesses. NES-D will leverage existing administrative and census records to assign demographic characteristics to the universe of approximately 24 million nonemployer businesses (as of 2015). Demographic characteristics include key demographics measured by the SBO (sex, race, Hispanic origin and veteran status) as well as other demographics (age, place of birth and citizenship status) collected but not imputed by the SBO if missing. A spectrum of administrative and census data sources will provide the nonemployer universe and demographics information. Specifically, the nonemployer universe originates in the Business Register; the Census Numident will provide sex, age, place of birth and citizenship status; race and Hispanic origin information will be obtained from multiple years of the decennial census and the American Community Survey; and the Department of Veteran Affairs will provide administrative records data on veteran status. The use of blended data in this manner will make possible the production of NES-D, an annual series that will become the only source of detailed and comprehensive statistics on the scope, nature and activities of U.S. businesses with no paid employment by the demographic characteristics of the business owner. Using the 2015 vintage of nonemployers, initial results indicate that demographic information is available for the overwhelming majority of the universe of nonemployers. For instance, information on sex, age, place of birth and citizenship status is available for over 95 percent of the 24 million nonemployers while race and Hispanic origin are available for about 90 percent of them. These results exclude owners of C-corporations, which represent only 2 percent of nonemployer firms. Among other things, future work will entail imputation of missing demographics information (including that of C-corporations), testing the longitudinal consistency of the estimates, and expanding the set of characteristics beyond the demographics mentioned above. Without added respondent burden and at lower imputation rates and costs, NES-D will meet the needs of stakeholders as well as the economy as a whole by providing reliable estimates at a higher frequency (annual vs. every 5 years) and with a more timely dissemination schedule than the SBO.
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• Working Paper

  
  
  Nonemployer Statistics by Demographics (NES-D): Exploring Longitudinal Consistency and Sub-national Estimates
  

  December 2019

  Authors: Adela Luque, James M. Noon, Kevin Rinz, Victoria Udalova, Julia Manzella, Michaela Dillon

  Working Paper Number:

  CES-19-34

  Until recently, the quinquennial Survey of Business Owners (SBO) was the only source of information for U.S. employer and nonemployer businesses by owner demographic characteristics such as race, ethnicity, sex and veteran status. Now, however, the Nonemployer Statistics by Demographics series (NES-D) will replace the SBO's nonemployer component with reliable, and more frequent (annual) business demographic estimates with no additional respondent burden, and at lower imputation rates and costs. NES-D is not a survey; rather, it exploits existing administrative and census records to assign demographic characteristics to the universe of approximately 25 million (as of 2016) nonemployer businesses. Although only in the second year of its research phase, NES-D is rapidly moving towards production, with a planned prototype or experimental version release of 2017 nonemployer data in 2020, followed by annual releases of the series. After the first year of research, we released a working paper (Luque et al., 2019) that assessed the viability of estimating nonemployer demographics exclusively with administrative records (AR) and census data. That paper used one year of data (2015) to produce preliminary tabulations of business counts at the national level. This year we expand that research in multiple ways by: i) examining the longitudinal consistency of administrative and census records coverage, and of our AR-based demographics estimates, ii) evaluating further coverage from additional data sources, iii) exploring estimates at the sub-national level, iv) exploring estimates by industrial sector, v) examining demographics estimates of business receipts as well as of counts, and vi) implementing imputation of missing demographic values. Our current results are consistent with the main findings in Luque et al. (2019), and show that high coverage and demographic assignment rates are not the exception, but the norm. Specifically, we find that AR coverage rates are high and stable over time for each of the three years we examine, 2014-2016. We are able to identify owners for approximately 99 percent of nonemployer businesses (excluding C-corporations), 92 to 93 percent of identified nonemployer owners have no missing demographics, and only about 1 percent are missing three or more demographic characteristics in each of the three years. We also find that our demographics estimates are stable over time, with expected small annual changes that are consistent with underlying population trends in the U.S.. Due to data limitations, these results do not include C-corporations, which represent only 2 percent of nonemployer businesses and 4 percent of receipts. Without added respondent burden and at lower imputation rates and costs, NES-D will provide high-quality business demographics estimates at a higher frequency (annual vs. every 5 years) than the SBO.
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• Working Paper

  
  
  The Metamorphosis of Women Business Owners: A Focus on Age
  

  November 2024

  Authors: Adji Fatou Diagne

  Working Paper Number:

  CES-24-71

  Due to their growth, increasing performance, and significant contributions to the United States economy, women-owned businesses have spurred the interest of policymakers, researchers, and advocacy groups. Using various data products from the Census Bureau's Business Demographics Program, this study examines how women business ownership changes over time by age. We find that young owners experienced growth in ownership between 2012 and 2020 and that younger employer businesses were mostly owned by women under the age of 35 in 2021. We show that among women aged 45 to 54 and those aged 55 to 64 ownership rates declined 5.5% and 4.8% between 2012 and 2020, implying an acceleration in the drop out of entrepreneurship for mid to late career age groups. We also show that older owners operate most businesses in capital-intensive industries, had more prior businesses, and higher rates of selling their most recently started businesses. Finally, we find that age groups often characterized as childbearing ages found balancing work and family as key drivers of their decision to start a business.
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• Working Paper

  
  
  Don't Quit Your Day Job: Using Wage and Salary Earnings to Support a New Business
  

  September 2013

  Authors: John Haltiwanger, Kristin Sandusky, Monica Garcia-Perez, Christopher Goetz

  Working Paper Number:

  CES-13-45

  This paper makes use of a newly constructed Census Bureau dataset that follows the universe of sole proprietors, employers and non-employers, over 10 years and links their transitions to their activity as employees earning wage and salary income. By combining administrative data on sole proprietors and their businesses with quarterly administrative data on wage and salary jobs held by the same individuals both preceding and concurrent with business startup, we create the unique opportunity to quantify significant workforce dynamics that have up to now remained unobserved. The data allow us to take a first glimpse at these business owners as they initiate business ventures and make the transition from wage and salary work to business ownership and back. We find that the barrier between wage and salary work and self-employment is extremely fluid, with large flows occurring in both directions. We also observe that a large fraction of business owners takeon both roles simultaneously and find that this labor market diversification does have implications for the success of the businesses these owners create. The results for employer transitions to exit and non-employer suggest that there is a 'don't quit your day job' effect that is present for new businesses. Employers are more likely to stay employers if they have a wage and salary job in the year just prior to the transitions that we are tracking. It is especially important to have a stable wage and salary job but there is also evidence that higher earnings from the wage and salary job makes transition less likely. For nonemployers we find roughly similar patterns but there are some key differences. We find that having recent wage and salary income (and having higher earnings from such wage and salary activity) increases the likelihood of survival. Having recent stable wage and salary income decreases the likelihood of a complete exit but increases the likelihood of transiting to be an employer. Having recent wage and salary income in the same industry as the non-employer business has a large and positive impact on the likelihood of transiting to being a non-employer business.
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• Working Paper

  
  
  Financing, Ownership, and Performance: A Novel, Longitudinal Firm-Level Database
  

  December 2024

  Authors: Steven J. Davis, John Haltiwanger, Lucia Foster, J. David Brown, John Sabelhaus

  Working Paper Number:

  CES-24-73

  The Census Bureau's Longitudinal Business Database (LBD) underpins many studies of firm-level behavior. It tracks longitudinally all employers in the nonfarm private sector but lacks information about business financing and owner characteristics. We address this shortcoming by linking LBD observations to firm-level data drawn from several large Census Bureau surveys. The resulting Longitudinal Employer, Owner, and Financing (LEOF) database contains more than 3 million observations at the firm-year level with information about start-up financing, current financing, owner demographics, ownership structure, profitability, and owner aspirations ' all linked to annual firm-level employment data since the firm hired its first employee. Using the LEOF database, we document trends in owner demographics and financing patterns and investigate how these business characteristics relate to firm-level employment outcomes.
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• Working Paper

  
  
  The Local Origins of Business Formation
  

  July 2023

  Authors: Timothy Dunne, John Haltiwanger, Emin Dinlersoz, Veronika Penciakova

  Working Paper Number:

  CES-23-34

  What locations generate more business ideas, and where are ideas more likely to turn into businesses? Using comprehensive administrative data on business applications, we analyze the spatial disparity in the creation of business ideas and the formation of new employer startups from these ideas. Startups per capita exhibit enormous variation across granular units of geography. We decompose this variation into variation in ideas per capita and in their rate of transition to startups, and find that both components matter. Observable local demographic, economic, financial, and business conditions accounts for a significant fraction of the variation in startups per capita, and more so for the variation in ideas per capita than in transition rate. Income, education, age, and foreign-born share are generally strong positive correlates of both idea generation and transition. Overall, the relationship of local conditions with ideas differs from that with transition rate in magnitude, and sometimes, in sign: certain conditions (notably, the African-American share of the population) are positively associated with ideas, but negatively with transition rates. We also find a close correspondence between the actual rank of locations in terms of startups per capita and the predicted rank based only on observable local conditions ' a result useful for characterizing locations with high startup activity.
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• Working Paper

  
  
  Access to Financial Capital Among U.S. Businesses: The Case of African-American Firms
  

  December 2006

  Authors: Alicia Robb, Robert Fairlie

  Working Paper Number:

  CES-06-33

  The differences between African-American business ownership rates and white business ownership rates are striking. Estimates from the 2000 Census indicate that 11.8 percent of white workers are self-employed business owners, compared with only 4.8 percent of black workers. Furthermore, black-white differences in business ownership rates have remained roughly constant over most of the twentieth century (Fairlie and Meyer 2000). In addition to lower rates of business ownership, black-owned businesses are less successful on average than are white or Asian firms. In particular, black-owned businesses have lower sales, hire fewer employees and have smaller payrolls than white- or Asian-owned businesses, on average (U.S. Census Bureau 2001, U.S. Small Business Administration 2001). Black firms also have lower profits and higher closure rates than white firms (U.S. Census Bureau 1997, U.S. Small Business Administration 1999). For most outcomes, the disparities are extremely large. For example, estimates from the 2002 Survey of Business Owners (SBO) indicate that white firms have average sales of $437,870 compared with only $74,018 for black firms.
  View Full Paper PDF

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