Business start-up applications – Tax ID increased 77% in the third quarter from the previous quarter, according to the U.S. Bureau of Labor Statistics (BLS).
This is the largest increase in enterprise applications ever, but there are several probable reasons for this increase. There is an interesting aspect to this data: the number of “high-inclination” applications (referring to applications with other high tilt standards, suggesting that high-inclination companies plan to hire employees) has increased significantly. That’s nowhere near as much (click on the following chart from the US Census, which shows the percentage of new applications for small businesses for the third quarter of 2013).
First, the high start-up costs of a small business are one of the biggest obstacles, especially for companies in the gig economy. Small businesses are more expensive to start than their corporate counterparts, owing to higher capital, labor, and other factors.
Another reason is that the CARES Act’s economic stimulus program expires at the end of the year, meaning that 30 million Americans will need additional benefits to find alternative sources of income. The third reason that was mentioned in our interviews was that many people saw the opportunity to start a small, solo business as a better alternative to returning to a traditional job.
Data for enterprise applications are taken from the Small Business Application Survey of the US Bureau of Labor Statistics (BLS). Business applications for small and medium-sized enterprises, but not all have one, the bureau said.
Self-employed people who work part-time use their national insurance numbers instead, according to the Bureau of Labor Statistics.
It is important that not all applications for an EIN lead to the creation of a small business, but almost all employers have one. Census data show that 15% of applications led to the creation of small businesses in the first year of their existence. Research on small and medium-sized enterprises shows that 9% of our survey said they would start a smaller business within the next 2-3 years and that they would eventually do so.
We also found that people who applied for an EIN and opened a commercial bank account were more likely to start and run a business, with about 18% of people doing so. These data are fairly consistent with the census, but indicate a significant increase in the number of small businesses.
We predict that the number of small and medium-sized enterprises in COVID will increase, but we will be able to say more about this forecast in the near future. We know that this increase is unlikely to be due to a single event and will probably signal a significant increase in the number of small sole traders planned for the future, as well as the growth of the small business sector.