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  • What is an EIN?

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique 9-digit number assigned by the IRS to entities for tax purposes. EINs never expire, and once an EIN is assigned to an entity, it will not be reissued even if the entity disappears.

  • Do all businesses need an EIN?

Sole proprietorships with no employees do not necessarily need an EIN. These businesses primarily constitute independent contractors who rely on the entrepreneur's Social Security Number (SSN) for tax purposes instead of an EIN. However, an EIN still has its advantages over an SSN for these type of businesses. For instance, the use of an EIN can preclude identity theft and help establish an independent contractor status.

  • What is a business application?

A business application is an application for an EIN made predominantly for business purposes.

  • Do the Business Formation Statistics (BFS) contain the entire set of business applications?

The BFS only cover applications for an EIN. Therefore, certain businesses initiated without an EIN (e.g. through the use of the business owner’s social security number for tax purposes) may not be covered by the BFS (see also the answer to the previous question).

  • What is a business formation?

A business formation is the birth of a new wage-paying business that originates from a business application.

  • What dates do the Business Formation Statistics (BFS) cover?

The Business Formation Statistics currently contain quarterly data starting from 2004q3 until the most recent quarter for which data is available.

  • Do Business Formation Statistics (BFS) represent the entire economy?

The BFS exclude business applications from a set of detailed industries within the agricultural, financial services, and private household sectors. Applications from these specific industries have very low transition rates to employer businesses. Applications by public entities (e.g. state or local governments) are also not included. The analysis also omits applications with missing state information (a small fraction of applications), and applications made from outside the 50 states or the District of Columbia, such as Puerto Rico, the Virgin Islands, or countries other than the U.S.

  • How often are the Business Formation Statistics (BFS) updated?

The BFS are currently released in beta form and updated quarterly.  Please check the News and Updates section for the latest updates.

  • How do new firm counts in the Business Formation Statistics (BFS) compare with those in the Business Dynamics Statistics (BDS)?

There are some key differences in how the BDS and BFS account for new business formation. First, the BFS keep track of quarterly business formations as opposed to the BDS, which provide an annual measure. Second, the BDS use employment rather than payroll to identify new businesses. Third, the BDS identifies firm births using a point-in-time measure based on employment in the payroll week of March 12 in each year. The BFS, by contrast, use the presence of quarterly payroll as a measure of business formation. The quarterly frequency leads to timing differences with respect to the BDS in the identification of business startups that hire their first employee after the payroll week of March 12. Fourth, the BFS do not account for employer business formations that originate from EIN applications dated before 2004q3. This effect, however, dissipates towards the end of the sample period, as nearly all business formations eventually tend to arise from business applications made since 2004q3. For these reasons, the BDS annual count of new employer businesses do not exactly match the corresponding count in the BFS, but they track each other closely.

  • Do the Business Formation Statistics (BFS) provide the number of business formations in any given quarter?

The BFS provide a forward-looking measure of business formations emerging from business applications made in a given quarter. For example, the number of business formations (BF4Q) associated with 2012q3 is the number of business formations that originate within the next 4 quarters (or 8 quarters in the case of BF8Q) from all the new business applications (BA) made in 2012q3.

  • Do Business Formations Statistics (BFS) include all employer business formations?

The BFS only consider entirely new employer business formations originating from business applications; new non-employer businesses or new employer businesses formed by existing firms are not included in the business formation measures. However, business applications contain applications that are made by existing firms or those intended for non-employer businesses.

Page Last Revised - October 8, 2021
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