Monthly business applications in Arkansas and elsewhere in the United States jumped during the COVID-19 pandemic, according to the U.S. Census Bureau, as businesses shut down and employees were thrown out of work and left to their own devices.
In Arkansas, monthly business applications hit a peak of 4,286 in July 2020 and have continued to stay at historical highs so far this year. In April, they stood at 4,206, dropping to 3,900 in May.
Business applications are requests to the IRS for an Employer Identification Number, which is required to pay payroll taxes. “However, a business application does not necessarily lead to a business formation,” the Penn Wharton Budget Model, a research program of the University of Pennsylvania’s Wharton School of Business, noted in a Nov. 30 report. “A business formation — or startup — refers to the point at which a new employer business actually begins operating. An employer business is a firm that has employees on payroll.”
PWBM went on to explain that most business applications don’t result in the formation of a new employer business. “Only 9 percent of business applications form an employer business within one year, and only around 25 percent of likely employer applications lead to a startup within one year of the application date.”
“Nevertheless, trends in the number of EIN applications provide a strong signal of startup activity,” the report said.
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