Number of Nonemployer Firms Shrinks Again in 2009, Census Bureau Reports

The number of nonemployer businesses, those without paid employees, declined by more than 260,000 between 2008 and 2009 across the United States, according to new data from the U.S. Census Bureau. Real estate agents, beauticians and construction contractors are some examples of nonemployer businesses.

In 2009, there were 21.1 million nonemployer firms, a decrease of about 1.2 percent from 2008. This continues a decline first noted in 2008 — following the beginning of the recession at the end of 2007 — when the total number fell by more than 350,000 from a peak of 21.7 million firms in 2007.

“Nonemployer firms generate a small percentage of total U.S. business receipts, but they constitute the majority of U.S. businesses,” said William G. Bostic Jr., associate director for economic programs at the U.S. Census Bureau. “The decline we have seen since 2008 reflects the change in economic conditions during that time.”

Although the number of nonemployer businesses declined in most states from 2008 to 2009, these businesses grew in three states and the District of Columbia during this period. Texas added the most firms (8,260), followed by Georgia (3,336), Louisiana (1,871) and the District of Columbia (462).

These new figures released today are from Nonemployer Statistics: 2009, an annual report on businesses without paid employees that includes more than 450 separate industries (as classified by the North American Industry Classification System) and are provided at the national, state, county and metropolitan area levels. Nonemployer businesses have annual receipts of $1,000 or more (except the construction industry, which includes receipts of $1 or more) and are subject to federal income taxes. Most nonemployers are self-employed and operate businesses that may or may not be their primary source of income.

Nonemployer businesses grew in relatively few industries between 2008 and 2009, coinciding with the economic downturn. Still, the personal care services industry, which includes barber shops and beauty salons, added close to 72,000 firms. The child day care services industry also showed an increase in nonemployer businesses, adding nearly 27,000 locations.

Real estate-related industries showed the largest decline, responding to the housing market downturn, with lessors of real estate, offices of real estate agents and brokers, and activities related to real estate (such as those who appraise real estate or manage it for others) losing about 145,000 firms combined.

Overall, U.S. nonemployer businesses generated approximately $837.8 billion in receipts during 2009.

Other highlights:

• Among the 50 counties with the highest number of nonemployer businesses, Harris County, Texas, added the most firms, 8,748, followed by Fulton County, Ga., which gained 3,767.
• New York County, N.Y., lost the most nonemployer firms in the country (8,241), followed by San Diego County, Calif., with a decline of 2,829 firms.
• New York lost more nonemployer businesses between 2008 and 2009 than any other state (23,963), followed by Pennsylvania (18,371), California (14,152) and Minnesota (13,658).

The 2009 Nonemployer Statistics data cover 21.1 million firms, which include 18.7 million sole proprietorships, 1.4 million corporations and 1.0 million partnerships. Nonemployer Statistics provide the only detailed information on the total number of nonemployer businesses and receipts earned down to the county level. Nonemployer Statistics excludes businesses with paid employees, which were covered in the 2009 County Business Patterns release on June 30, 2011.

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>.