Bill, I count 25, 22 with records.

LLC Formation Table

You're right. Not sure why I miscounted. I'll fix it.

Let's put this puppy to bed.

Prof. Larry Ribstein:

Simmons blog, pointer from Professor Bainbridge, has data showing that "LLC's are being formed at record numbers nationwide. Since small businesses drive the employment numbers and the economy, this should portend a robust recovery for the United States in the next year."

I like the data because I work on LLCs. But I'm not sure about the conclusion. I've been collecting data on LLCs over the years (e.g.), which indicates a shift from other organizational forms (partnership, and to a lesser extent corporation) to LLCs, rather than new business formation.

Also, on a semi-related subject, more on Resolving the Controversy between Payroll and Household Surveys:

We believe the comments of the Federal Reserve Chairman Alan Greenspan, when combined with the March 5, 2004 Bureau of Labor Statistics release, has now once and for all, turned the Household/Payroll Survey discrepancy into a “non-issue.”

The argument that the Household Survey more accurately reflects Job creation has been thoroughly discredited. Employ it at your own risk.

I'm going to wake the puppy up.
1) I want to see data to back up Prof. Ribstein's assertion that LLC's are canabalizing growth in other forms of new business. I presume, Jade, that you are using his statement to assert that the growth in LLC's is occuring because a) other forms (partnerships, e.g.) are converting and/or b) people are forming LLC's instead of the other forms. However, to prove this, you need statistics (and I didn't see any in Ribstein's post or article link) that show: a) the LLC trend coincides with a downturn in formation of other businees entities and/or b) the number of LLCs that are conversions from other entities. Show me those stats, and I'll concede your point.
2) This is actually a general question, somewhat related to employement stats. I am currently unemployed, and filing claims with the state gov. If I get a new job (on my own, and not throught he state), and stop filing claims, am I counted as a "new job" or a "discouraged worker" (since I'm no longer filing claims)? Does anyone know, and, if this a widespread thing, could this have any statistical effect?

John, this whole area is awash with estimates, and the "discouraged" worker is one big one. If you don't show up on a payroll report to the state, and stop filing for unemployment, you're "discouraged". So, the self-employed and start-ups are counted as "discouraged" as far as I can tell.

Jade, read the BLS release. They create a graph line similar to the payroll survey data from the household data by subtracting self-employeds and ag workers, and add in people who hold more than one job. Yeah, if I monkey with any number enough, I can make it turn out like another number.

Prof. Ribstein's paper dates from 2000, and his last year of data is 1999. Our examination of the topic focuses on 1999-2003, or the peak year of the Clinton boom, the year of the Clinton recession, and the Bush boom. While each state can differ, many show no major increase, or a decline from 2000 to 2001, and the record highs in 2003 are often 200% or more of the 1999 numbers. I've linked the data, where possible, on the state name. Nevada, for example, does not show the change postulated by the Prof.

One of the points of the post was to demonstrate that the two surveys differ in jobs created, with the household survey showing over 2.1 million more jobs having been created. Those are self-employeds and folks in start-ups, like new LLC's.

Mr. Fusco: The onus of proof is on Mr. Hobbs. After all, he's the one telling us this boom in LLC/LLP formation is really a huge 'hidden' jobs boom.

Prof. Ribstein says he doesn't believe it.

Myself, I believe the LLC boom is comprised of 3 causes: 1. existing corps transferring over; 2. new businesses; and 3. detached workers/second (or sideline) jobs/foreign entities.

Frankly, if an LLC--be it an existing business or a startup--starts generating revenues, they're going to be counted in the payroll survey.

Jade, the BLS admits that it doesn't count self-employeds and ag workers in the payroll survey. Therefore, using the payroll survey as a measure of jobs recovery is flawed from the start.

In March 2004 Dr. Tim Kane looked at the disparity between the two surveys. I agree with his conclusions. LINK

The payroll survey may be systematically undercounting job growth, creating an unprecedented job growth gap between its total employment measure and the household survey's. In the past six months, the BLS has approved new techniques to smooth the household survey's measure of total employment in order to make month-to-month comparisons. Analysts can now point with confidence to the employment of a record number of Americans as of January 2004 and the employment of an additional 2.2 million workers since the recession ended.

Why has the payroll survey missed so much recent job creation? The BLS is skeptical of the start-up explanation, and recent benchmarks confirm the BLS's position. Self-employment is a different matter, and the latest statement by the BLS commissioner confirms the appearance of a new class of contractors. The evolution of the workforce--specifically, the demographic emergence of consultants and contractors who do not consider themselves self-employed--is a likely wedge between the surveys. Self-employment has grown by over 600,000 in two years, and misidentification by the LLC and consulting workforce implies a much higher number.

Finally, a new hypothesis quantified in this report is that decelerating turnover is artificially deflating company payrolls, creating an illusion of 1 million jobs lost since 2001. The heightened insecurity since September 11, the Iraq war, and the specter of outsourcing are logical explanations for reduced turnover. Here again, innovative new data series on employment dynamics from the BLS allow economists to confirm this hypothesis.

Jade, et al.,
Is there any way to ge tthe following statistics/information - which might put an end to the debate here:
a) how many of these LLC's are new and how many are transfers of existing businesses?
b) how many people are employed, on average, by these LLC's?
c) what the average lifespan of an LLC is?
d) if, and how many, LLCs are included in the payroll survey?
Does anyone compile stats like this? (not being a journalist or an academic in a business related field, I don't know where to look). And, as a related question, has anyone in the mainstream media looked into these quesitons?

Mr. Fusco: All very valid and good questions.

A. I don't think the data exists. Clearly--if you take a look at most LLCs on the web, those businesses were created prior to the existence of LLC/LLPs.

B.I don't think the data exists.

C.Unknown; we do know, however, that most small business startups fail within two years.

D. Unknown; however, once any business starts generating revenues they are subject to the payroll survey.