Business Creation and Job Growth

Business creation is the act of establishing and running a business, usually a sole proprietorship or limited liability company (LLC). A start-up venture requires time, energy, and resources to get it off the ground. But it can also be a rewarding experience.

In addition, entrepreneurship is beneficial for society. It enables economic sectors to be created, and increases productivity. It also helps increase the standard of living.

Entrepreneurship is also an important source of innovation. It involves the creation of new products or services that are not yet in demand, and the development of technologies that have not been available before.

During the pandemic, the number of new business applications soared, with some experts calling it a “renaissance” in “genuine entrepreneurship.” But it’s unclear whether that surge has been permanent or a temporary blip.

The influx of applications to form businesses has been broad-based, with more than half of all business applications coming from likely employer firms — those most likely to hire employees when a new business gets started. This high share of applications to become employers is another indicator that the surge is a permanent shift in the economy’s business dynamics, and one that can help drive strong rates of job growth in the years ahead.

It’s important to remember that the business formation data are only a snapshot of entrepreneurial intent. While there is a very high correlation between the number of business applications and true business formation months afterward, a small percentage of those applications don’t turn into real startups.