February 24, 2004

Tennessee Small-Business Formation Surged in 2003

One of the raging economic debates these days is about whether the government's "employer survey" or its "household survey" more accurately reflects the state of job creation in the nation today. The employer survey tracks jobs at big companies. The household survey is more likely to pick up self-employed people, entrepreneurs forming small businesses, and people being hired by small businesses. I've written several times about the subject, posts that you'll find in my Economics & Business category

Many small businesses are formed as limited liability corporations (LLCs). LLCs first became a legal form of business organization in Tennessee in 1995. So I contacted the Tennessee Secretary of State's Division of Business Services and inquired about the rate of LLC formation in Tennessee and here is what I found:

More LLCs were formed in Tennessee in 2003 than in any year, ever.

In 1998, at the peak of the Clinton-era economic boom, 6,934 LLCs were formed in Tennessee. That dropped to 5,710 in 1999, and then plummeted in 2000 as the Clinton-era boom ended, the Internet bubble burst, Wall Street slid, and the economy slumped toward a recession. There were just 4,629 LLCs formed in Tennessee that year. In 2001, President Bush's first year, the rate of LLC formation began to rise, reaching 4,962. In 2002, there were 6,204 LLCs formed in Tennessee. And last year, as the Bush Boom gained strength, Tennessee entrepreneurs formed 7,412 LLCs.

Tennessee is only one state - I'd love to have data from all 50 states - but it is one more bit of data indicating there may well be more validity to the household survey than its critics will admit.

UPDATE: A simple request to my readers: I don't have time to hunt down the data on LLC formation in every state, but you can help. Get on your state government's website and find the Secretary of State's office - that's probably where LLCs are filed. Click around until you find which office or division handles such business filings, and find a contact name, and send them an email asking for data on LLC formation over the past decade or so. Then pass on to me what you get, and we'll publish it here.