America's smallest firms are not a footnote to the small-business economy. They are most of it.
Prefer the short version? Read the accessible article →The usual image of a small business has a payroll. The usual small business does not. The SBA Office of Advocacy's 2025 U.S. profile counts 29.8 million nonemployers among 36.2 million small businesses, approximately 82.4%. That fact changes the denominator in almost every conversation about entrepreneurship.
But the count is not a measure of output, quality, or resilience. Census records show substantial aggregate receipts; a Federal Reserve survey shows weaker profitability, heavier reliance on owner funds, and more revenue optimism than among employer respondents. This paper separates those claims and proposes an operator's framework for adding capability before deciding whether to add payroll.
82.4%
of U.S. small businesses in the 2025 SBA profile had no paid employees
SBA Office of Advocacy, 2025
30.4M
nonemployer establishments recorded for reference year 2023
U.S. Census Bureau, NES
$1.8T
in aggregate 2023 nonemployer receipts, before expenses
U.S. Census Bureau, NES
The Office of Advocacy's 2025 U.S. profile counts 36,186,089 U.S. small businesses on a consistent 2022 basis: 29,811,495 without paid employees and 6,374,594 with 1–499 employees. Nonemployers are therefore approximately 82.4% of that small-only total. Advocacy generally defines an independent firm with fewer than 500 employees as small for research purposes. The publication year is not the observation year.
Figure 1
Composition of U.S. small businesses
Nonemployer businesses — 29,811,495
82.4%
Employer firms, 1–499 employees — 6,374,594
17.6%
U.S. small businesses, 2022 underlying count. Shares calculated from the profile's small-only total of 36,186,089.
Source: SBA Office of Advocacy, 2025 U.S. Small Business Profile
Nonemployer means a business with no paid workers other than its owner or owners; it need not mean a lone person doing every task. Census Nonemployer Statistics covers businesses subject to federal income tax, with no paid employees and at least $1,000 in annual receipts, or $1 in construction. The series is based on tax records and reports establishments. A firm can own more than one establishment. Employer counts may also be reported as firms or establishments depending on the source. Those units cannot be silently added together.
Figure 2
The nonemployer count rose again
| Reference year | Nonemployer establishments | Change from prior year |
|---|---|---|
| 2022 | 29,811,495 | — |
| 2023 | 30,427,808 | +616,313 (+2.1%) |
Economic significance needs a different measure from prevalence. NES records nearly $1.8 trillion in total receipts in 2023. Receipts are inflows before expenses, not profit or value added. Dividing those receipts by GDP would not establish a contribution to GDP. Many nonemployers are a primary job for their owners, while others supplement another source of income. The 2025 Small Business Credit Survey found that 79% of its nonemployer respondents described the firm as the primary owner's only job. That survey percentage cannot be substituted for a population count.
The Federal Reserve's 2025 Small Business Credit Survey provides a view of firm experience. It collected 5,027 nonemployer and 6,525 employer responses in a nationwide convenience sample fielded in fall 2025, then applied survey weights. These are survey estimates for respondents and their weighted comparison groups, not administrative population totals or a random sample of all U.S. firms. The profitability question asks about the end of 2024; expectations look forward 12 months from the survey.
Figure 3
Weaker current position, stronger expectations
| Measure | Nonemployer respondents | Employer respondents |
|---|---|---|
| Profitable at end of 2024 | 41% | 47% |
| Expect revenue growth in next 12 months | 63% | 56% |
| Fair or poor financial condition at survey | 68% | 57% |
The tension matters. Optimism is an expectation, not realized revenue. A business can anticipate more sales while lacking a financial buffer today. The 2026 Main Street Metrics report, which tracks employer firms only, places their 47% end-2024 profitability reading below the 57% reported for end-2018 in its 2019 survey. That series is context for employer conditions, not a trend for the entire small-business population.
Figure 4
Selected reported challenges
| Challenge in prior 12 months | Nonemployer | Employer |
|---|---|---|
| Reaching customers | 58% | 54% |
| Growing sales | 48% | 52% |
| Utilizing technology | 44% | 37% |
| Paying operating expenses | 50% | 55% |
| Uneven cash flow | 48% | 50% |
Financing is equally mixed. In the survey, 51% of nonemployers had no outstanding debt, compared with 31% of employers. During the prior 12 months, 26% of nonemployers applied for a loan, line of credit, or merchant cash advance, compared with 38% of employers. No debt is not the same as no financing need: a firm may have repaid credit, drawn on personal savings, or avoided an application for another reason.
Figure 5
Financing and the owner as backstop
| Measure | Nonemployer | Employer | Denominator |
|---|---|---|---|
| No outstanding debt | 51% | 31% | Surveyed firms, fall 2025 |
| Applied for credit | 26% | 38% | Surveyed firms, prior 12 months |
| Used owner's funds to address financial challenges | 64% | 54% | Firms reporting a financial challenge |
The conditional denominator in the last row is essential. Sixty-four percent of nonemployers that reported a financial challenge used owner funds in response, against 54% of comparable employer respondents. It does not mean 64% of all U.S. nonemployer businesses did so. Regular use of personal savings as a financing source was also reported more often by surveyed nonemployers, 57% versus 24% of employer respondents.
Lower profitability does not establish that nonemployer status caused it: revenue scale, industry, firm age, owner goals, and other differences can matter. More optimism does not forecast actual growth. A plan to hire is not a hire. Aggregate receipts do not describe the median firm. Survey responses cannot be multiplied by the SBA count to manufacture national totals.
In the SBCS, 31% of nonemployer respondents planned to add employees in the following 12 months. Another 38% reported using contract workers in the preceding 12 months. Those are different questions and periods; some firms could be in both groups. The findings show that no employees today is not the same as no appetite for capacity. They do not show which capacity choice produced better outcomes.
Figure 6
Capacity choices are observable; outcomes are not settled
| Survey indicator | Nonemployer share | Time window |
|---|---|---|
| Planned to add employees | 31% | Next 12 months after fall 2025 survey |
| Used contract workers | 38% | Prior 12 months before fall 2025 survey |
An unstandardized handoff imposes training and supervision on any new worker, whether payroll or contract. Conversely, a documented process may still require an employee when work is continuous, sensitive, time critical, or central to the firm's advantage. No technology finding here establishes that employees have become unnecessary.
A business can be financially worthwhile while depending entirely on its owner's judgment and presence. The operational question is whether its capability is reproducible and transferable, not whether the owner has succeeded at escaping delivery work.
These criteria distinguish owner-dependent output from organizational capability. A firm can meet them with no employee, and a firm with several employees can fail them. None guarantees saleability or profitable growth. Their value is diagnostic: they reveal which dependency needs attention before more volume makes the weakness expensive.
Framework
The Capacity Ladder
The ladder does not turn a contractor into a cheaper employee by definition. It asks what must be controlled, how often the capability is needed, and what the full cost of delivering it will be. A stable queue of core work may justify payroll before automation. A sporadic accounting or design need may justify outside expertise. The economics decide.
In an optional end-of-survey AI module, 58% of nonemployer respondents reported using AI at least to some degree; approximately 80% of nonemployer respondents opted into that module. It measures reported use within a survey subset, not a national estimate of jobs displaced or margins created.
The test of the hypothesis is operational. Can the firm acquire customers predictably, deliver at an acceptable standard, see the economics of each unit of work, recover when the owner is absent, and add capacity without losing control of quality? A small headcount with weak answers is still fragile. A larger payroll with strong answers may be a better business. Capability, risk, and cost must be measured together.
There is a macroeconomic boundary to this argument. Nonemployer counts cannot replace employer job creation as a measure of labor-market opportunity. Employer firms hire people, train them, and support aggregate payroll. The SBA's 2026 FAQ reports 62.3 million people employed by small businesses, 45.9% of private-sector workers, on its reported employment basis. Firm-level improvements in systems and margins are additional dimensions of development, not substitutes for employment growth across the economy.
The American small-business population is chiefly businesses without payroll, yet the businesses behind that statistic differ widely in purpose and condition. Their aggregate receipts are substantial. Surveyed nonemployers report lower profitability and greater financial strain than employers, while expecting more revenue growth. Many rely on their own funds; some intend to hire. Each statement describes a different measure and must remain attached to it.
The business of one is a starting configuration, not a destiny.
A small business should not be judged solely by how many people it employs. The more useful firm-level question is what capabilities it possesses, how reliably those capabilities operate, and whether the economics support the next layer of complexity. Growth can mean hiring. It can also mean stronger margins, greater capacity, resilience, transferable knowledge, and more valuable customer relationships.
References
Cite this research
Rebolledo, Alenn. "The Business of One." Liquid Research, 2026. https://liquidiq.io/research/the-business-of-one.
Rebolledo, A. (2026). The Business of One. Liquid Research. https://liquidiq.io/research/the-business-of-one
@misc{rebolledo2026the,
author = {Rebolledo, Alenn},
title = {The Business of One},
howpublished = {Liquid Research},
year = {2026},
url = {https://liquidiq.io/research/the-business-of-one}
}Liquid Research is independently published by Liquid IQ. It is not peer-reviewed and has no DOI.
How we research: Liquid Research methodology →
Author
Founder
Alenn founded Liquid after working across startups, technology, analytics, operations, and marketing strategy. His research focuses on where growth is actually constrained and how operating systems change business outcomes.
Strategy · Systems · Growth · Decision Intelligence
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