March 24, 2004

LLC Data Project Update #7: Delaware

A record number of limited liability companies were formed in Delware in 2003, more evidence that the current economic recovery is powered by small business and entrepreneurs whose jobs often don't show up in the federal government's official jobs growth survey of large employers.

According to a spreadsheet emailed to me by the Delaware Department of State, Division of Corporations, 53,926 limited liability companies, or LLCs, were formed in Delaware in 2003, about 13.5 percent more than in 2002 - and 34 percent more than the 40,009 formed in 1999, the peak year of the last American economic boom.

Why so many LLCs formed in tiny Delaware? It has some of the most pro-business incorporation laws in the country, so it is the state of choice for many entrepeneurs to register their businesses.

The data Delaware sent me is intriguing. Unlike most of the 20 other states I've looked at so far, Delaware actually saw a significant decline in the formation of LLCs between the end of the last economic boom and the start of the current Bush Boom. As the Clinton economy tumbled into recession at the end of 2001, Delaware was just finishing its best year ever for LLC formation - 47,904. But in 2001, that declined over 9 percent to 43,272 LLCs. It began to rebound in 2002, almost equaling the year 2000 peak, and then set a record in 2003.

(One caveat about the Delaware data - they have not finished the tally for the last two months of 2003, and so provided me full-year data for 2003 by including for November and December a number equal to the monthly average for the year.)

Delware is the 21st state for which I have collected data, and the 18th in which LLC creation reached a new record high in 2003. The others are Alaska, Florida, Hawaii, Idaho, Illinois, Minnesota, New Hampshire, New York, Nebraska, North Dakota, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia, Washington Wisconsin.

Utah set a record in 2002 and then declined slightly in 2003. Nevada and Kentucky set records set in 2002 and may have in 2003 - I have not been able to gather complete data for those states for 2003. I continue to seek data from the remaining 29 states.

For stats from other states, see my Economy & Business archives and then read the various LLC-related posts.