Business Structure

1. 1

   The most common legal form of business organization among small employers is the Subchapter S-corporation (31%). It is followed in frequency by the C-corporation (26%), the proprietorship (21%), the limited liability corporation (LLC) (12%), and the partnership (6%).

2. 2

   It is uncommon to change legal forms. Of those who do change, most move from proprietorships to other forms. Changes occur most frequently for liability reasons.

3. 3

   Boards of directors of small C-corporations typically have three members. Those members appear to have notable business experience and functional expertise. However, boards are more likely to serve in simple fulfillment of legal requirements (68%) than as advisory bodies (27%).

4. 4

   A single individual (including a spouse) owns 59 percent of employing businesses. Another 27 percent have two owners. Both the number of owners and the composition of ownership changes little over time.

5. 5

   Seventy-eight (78) percent of small employers have a single business location (excluding temporary work areas like a construction site). Another 14 percent have two. Most small employers with multiple locations have them exclusively in one state. One percent of all businesses have at least one location outside the United States.

6. 6

   The home, including a garage, basement annex, etc., is the primary location for more than one in four employing businesses. The overwhelming majority of those have fewer than 10 employees. Twenty-six (26) percent with businesses located outside the home have home offices, i.e., a room (s) in the home that is used solely for business purposes.

7. 7

   Employing businesses are typically open five days a week (52%). Just 3 percent are open fewer. The rest are open six (19%) or seven (26%) days a week.

8. 8

   Employing businesses are open an average of about 11 hours per day and a median of almost nine. Six (6) percent are open 24 hours a day.

9. 9

   A management structure (beyond the owner) often appears when businesses have relatively few employees. Thirty-five (35) percent of all employing businesses have at least one person in addition to the owner(s) whose primary job is directing, managing, or supervising others. Two-thirds of firms employing 10-19 people have at least one such person and 80 percent of those with more than 20 employees do.

10. 10

    Eighty-five (85) percent of small businesses are operated by owner/managers. The separation of ownership and management is most common among larger, small businesses.

11. 11

    As businesses grow, employees more frequently functionally specialize in their work duties. For example, 36 percent have at least one employee whose sole function is accounting, bookkeeping, or finance. A non-ownership management structure seems to appear before specialized employee functions.

Volume 4, Issue 7, 2004
ISSN 1534-8326

William J. Dennis, Jr.
NFIB Research Foundation

• 1Is your business legally structured as a proprietorship, a partnership, a regular corporation also called a C-corporation, a Sub-chapter S-corporation or a limited liability corporation? Top 100
• 5Counting you and your spouse, if you have a spouse, as one owner, how many current owners of this business are there? Top 100
• 6Not counting work sites, such as a construction site, how many locations does this business have? Top 100
• 9Do you have any employees, not including yourself, whose primary job is to direct, manage, or supervise the work of other employees? Top 100
• 2Do you effectively have a managing partner or owner, or salaried manager who oversees day-to-day operations of the business?
• 3How many members are on your company’s Board of Directors?
• 3aHow many of those Board members currently own and operate their own business, or did own and operate one?
• 3AbDo one or more of your Board members have legal expertise?
• 3BbDo one or more of your Board members have finance expertise?
• 3CbDo one or more of your Board members have marketing or sales expertise?
• 3cDoes the Board of Directors exist as a true advisory body, or does it primarily exist to fill legal requirements?
• 4Has the legal status of this business changed in the last three years?
• 4aWhat was the prior legal status? A proprietorship, a partnership, a C-corporation, an S-corporation, or an LLC?
• 4bWhy did you change it? Was it for:?
• 5aIn the last three years, has the number of owners increased, decreased or stayed the same?
• 5bIn the last three years, is (are) the individual(s) who owns the business the same person (people) or has (have) the person (people) changed? Disregard any change in marital status over the last three years.
• 5cDoes another business or a non-profit organization have some ownership in this firm?
• 5dIn the last three years, have you divided your business into two or more businesses or sold a substantial share of it to someone else?
• 5eIn the last three years, have you purchased another business or a substantial share of one, and integrated it into this business?
• 6aAre all the locations in the same state, or are they in more than one state?
• 6bDo you have one or more locations outside the United States?
• 6cIs this business operated primarily from the home, including any associated structure, such as a garage or a barn?
• 6c1Do you have a room set aside in your residence for exclusive use as a business office?
• 7How many days are you typically open for business?
• 7aAre any of these half-days?
• 7bWhich is the typical half-day that you are open?
• 7cAre you typically closed:?
• 8What are your usual hours of operation? What time do you open?
• 8aWhat time do you close?
• 9aAbout how many employees is it whose primary job is to manage or supervise others?
• 9bHow many of your employees perform managerial or supervisory tasks from time-to-time, but primarily do other things?
• 10A(exclusive job responsibility) Handling government rules and regulations, licenses, and related paperwork.
• 10B(exclusive job responsibility) Marketing and/or sales.
• 10C(exclusive job responsibility) Personnel or human resources.
• 10D(exclusive job responsibility) Accounting, bookkeeping, or finance.