Everyone Wants to Start a Business; Record 672,000 New Companies in 2005

$138B
US Small Business IT  Spend in 2006 
(Forrester)

The U.S. is in the midst of the largest entrepreneurial surge this country has ever seen.  Nearly 672,000 new companies with employees were created in 2005, the biggest business birthrate in U.S. history, according to Small Business Administration projections, via Fortune Small Business. 

That is 30,000 more startups than in 2004, and 12% more than at the height of dot-com in 1996.

66% of respondents in a 2006 Yahoo Small Business and Harris Interactive survey said they wanted to start a company someday; 37% of those said they hoped to do so within the next five years.

Other Revealing Stats on American Entrepreneurship:

  • Recent immigrants started 25% more companies per capita than native-born citizens did in 2005. 
  • The owners and partners of privately held companies pay more than 54% of all individual income taxes, according to the Tax Foundation (taxfoundation.org).
  • More than 37% of individuals in the highest tax bracket are business owners. 
  • The Tax Foundation estimates that 60% of all corporate tax returns are now from S-corporations. 
  • From 1980 to 2005, the number of S-corporations, farms, sole proprietorships, and partnerships filing business returns grew by 572%, to 3.7 million.
  • Forrester Research found that in 2006 U.S. small businesses spent about $138 billion on technology products and services, accounting for 19% of all IT spending. 

The SBA projects that 544,800 small businesses closed in 2005, a slight increase from the 540,658 that closed in 2003. An additional 39,201 probably filed for bankruptcy, according to SBA estimates, up from 35,037 in 2003.

Why Now?

  • No Job security: Between 70,000 and 80,000 corporate employees are laid off every month, about 30,000 more than just six years ago, according Challenger Gray & Christmas.
  • Top executive positions are also less secure than ever - 1,322 CEOs left their jobs in 2005, twice as many as in the previous year. 
  • Pension funds and health-care benefits, once guarantees of employee loyalty, are being trimmed or abolished. 
  • Even stock options are offered less frequently. 
  • No need to leave your current job: According to the SBA, the total number of firms with no employees grew by 26% from 1997 to 2004, to 19 million. A little more than half of those companies are run by workers with another primary source of income.

In 2002, according to Chicago-based consulting firm the Patent Board (patentboard.com), entrepreneurs accounted for 40% of "highly innovative" firms - those with 15 or more patents in the previous five years. 

Related story: Everyone wants to start a business - FORTUNE Small Business

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