Don't Forget About Nonemployer Small Businesses

Dawn Rivers Baker

If you run a small business in the United States, the odds are 3 to 1 that it's a nonemployer business.

Sadly, the odds also favor something of an identity crisis for you.

The term "nonemployer" business was coined (as far as I know) by the Census Bureau, and almost nobody uses the term except me (also as far as I know). I use it for its precision.

Many people refer to a firm with no paid employees as "the self-employed," but that's inaccurate. If you are in business and you work in your business, you are self-employed—no matter how many employees you have.

Some folks call this set of firms "sole proprietors." Again, misleading.

"Sole proprietorship" is a legal business form. It doesn't matter how many employees you have; if you file a Schedule C with your taxes, you are a sole proprietor.

There are other terms. There is the unwieldy "one-person business" or the cozy "personal business." There are "solopreneurs" and independent contractors and freelancers, and there are "side businesses" and "hobbyists," too.

It's a big pie—more than 21 million strong—and there's a lot of ways to carve it.

And that's why I like "nonemployer."

Policymakers tend to ignore these nanobusinesses. "Nonemployer business" is a nice, all-encompassing term, and there is strength in numbers.

Dawn Rivers Baker is the award-winning journalist behind The MicroEnterprise Journal, the online business news weekly that covers politics and policy, the economy, and research for and about microbusinesses. Baker also blogs at The Journal Blog.