March 16, 2004

LLC Data Project Update #3

Add Oregon, Hawaii, Minnesota, Nevada, Pennsylvania and Rhode Island to the growing list of states where the formation of limited liabilty companies - essentially, small businesses and self-employed entrepreneur's ventures - have been on a record-setting pace. Details on those states is below, but first some background. Regular readers know I've been gathering data on the formation of limited liability companies over the past several years in each state, in order to determine if formation of LLCs - a business entity popular with small businesses and self-employed entrepreneurs - might indicate a strong small business/entrepreneurial component to the current economic recovery.

If LLC formation is surging nationwide, as it is in Tennessee, perhaps that might go part of the way toward explaining why the federal government's Employer Survey, which tracks job growth or job loss primarily at big companies, shows stagnant job growth, while the Household Survey, which surveys households about employment, shows strong employment job growth.

And increasingly it appears that LLC formation indeed is surging nationwide...

I've previously collected and posted the results from nine states - Alaska, Florida, Kentucky, Idaho, Illinois, North Dakota, Tennessee, Virginia and Washington - and in all eight LLC formation set a record in 2003. (click here, here, and here for key previous posts on this topic.)

A caveat about the data: some states count by fiscal year, others by calendar year, and some states' data includes foreign-owned LLCs, while others include only the domestic LLCs, so you can't do state-to-state comparisons. But the data still indicates strong growth in each state, and as the number of states showing record LLC formation in 2003 rises, it is increasingly indicative of a national trend and increasingly indicative that this economic recovery is indeed being powered by small businesses and entrepreneurs, whose creation of jobs is being missed by the Employer Survey.

Here are the latest states from which I've collected data:

Oregon: LLC formation rose from 7,609 in 1999, the peak year of the Clinton-era economic boom, to 15,209 in 2003, an increase of 99.9 percent in four years. And last year's total was a 58 percent increase over 2002. LLC formation in Oregon dipped from 10,667 in 2000 to 8,905 in 2001. The stats for the years 1995-2001 are online here. Stats for 2002 and 2003 were emailed to me from the Oregon Secretary of State's office.

Pennsylvania: Pennsylvania officials have provided me with stats via email for the years 2000 through 2003. Add Pennsylvania to the list of states where LLC formation set a record in 2003 – 16,147 LLCs were formed, up 31 percent over 2002 and up 390 percent over the 4,140 formed in Pennsylvania in 1999, the peak year of the Clinton-era economic boom.

Nevada: Nevada's stats for 1995 through 2002 are online here and show that LLC formation set a record in 2002 in that state - Nevada entrepreneurs formed 16,663 LLCs in 2002, up 60 percent from number created during the economic boom peak year 1999. Another 9,585 LLCs were formed in the first six months of 2003 – on pace to set another record in 2003. (I have emailed Nevada officials asking for LLC stats from the second half of 2003, but it clearly is likely to show Nevada is yet another state where LLC formation set a new record in 2003.

Minnesota: Minnesota sent stats by email. LLC formation set a record there in 2003, with 12,668 formed, up 29 percent from 2002 and 435 percent from 1999.

Rhode Island: Rhode Island sent information by email, for the years 1992-2003. LLC formation set a record in 2003, with 3,146 LLCs formed, up 30 percent from 2002 and up 222 percent from 1999.

Hawaii: Another state, another record. The Commission of Securities for the Business Registration Division of the Department of Commerce and Consumer Affairs of the Aloha state, sent data for the years 1999-2003.
State of Hawaii. The 4,487 LLCs formed in Hawaii in 2003 was 31 percent more than in 2002, and 283 percent more than in 1999, the year the Clinton-era economic boom hit its peak.

That makes 15 states from which I now have data - Alaska, Florida, Hawaii, Idaho, Illinois, Kentucky, Minnesota, Nevada, North Dakota, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia, Washington - and in all 15 LLC creation set a record in 2003 (with the possible but unlikely exception of Nevada, see above), with LLC formation up sharply compared to both 2002 and to 1999, the year the Clinton-era economic boom peaked.

This is a national trend, indicative of the strong small-business/entrepreneurial foundation to the Bush Boom economic recovery.

UPDATING THE UPDATES: You can find past and future LLC Data Project Updates by visiting my category archive for Economy & Business news and commentary.