Four Sun Belt States Produced 28% of America’s Business Applications in August

More than half a million Americans applied to start businesses in August, and a remarkable share of that activity was concentrated in four Sun Belt states.

Florida, Texas, Georgia and North Carolina together accounted for roughly 150,000 seasonally adjusted business applications during the month, about 28% of the national total.

The concentration offers another measure of the economic shift toward the South, where population growth, new development and migration have been reshaping everything from housing and retail to employment and entrepreneurship.

But the newest numbers also contain a warning sign: business applications fell sharply nationwide in August.

The United States recorded 531,728 applications, down 7.8% from July, according to new Business Formation Statistics released by the U.S. Census Bureau on Sept. 11.

That makes the latest Sun Belt story more complicated than another tale of uninterrupted growth.

Florida and Texas remain business-creation giants

Florida and Texas continue to generate extraordinary volumes of potential new businesses.

The four-state Sun Belt group was led by Florida and Texas, followed by Georgia and North Carolina. Together, their roughly 150,000 seasonally adjusted applications represented more than one of every four applications submitted nationwide.

The numbers help explain why so many companies selling everything from commercial real estate and banking services to software and insurance continue to view these states as unusually fertile markets for small businesses.

They also reflect something larger happening to the American population.

Texas and Florida have added millions of residents during the decade, while North Carolina and Georgia continue to attract households and businesses to metros including Charlotte, Raleigh, Atlanta and their surrounding communities.

Population growth creates customers. It also creates potential entrepreneurs.

A new resident may arrive as an employee and later start a landscaping company, restaurant, consulting practice, construction business, online shop or medical practice. Growing suburbs create demand for services that did not exist when those communities were smaller.

The result is an economy where new rooftops can eventually produce new businesses.

An application does not necessarily mean a new business opened

There is an important distinction in the Census numbers. These are business applications, not 531,728 newly opened companies.

The Census Bureau builds the series primarily from applications for Employer Identification Numbers, or EINs. It excludes certain categories including estates, trusts, tax liens, public administration and some agricultural and other filings.

Some applicants will eventually employ dozens or hundreds of people. Others may become one-person businesses. Some will never begin operating at all.

To get closer to identifying businesses likely to become employers, the Census Bureau separately tracks “high-propensity business applications.”

Those include applications with characteristics historically associated with eventually developing payrolls, such as plans to hire employees, a first wages-paid date, incorporation or activity in industries including manufacturing, retail, health care and food service.

The Census Bureau then uses historical patterns to estimate how many applications are likely to become businesses with payroll tax liabilities.

For the August cohort, it projects 28,501 employer businesses will form within four quarters. That projection was down 4.6% from July.

August brought a noticeable slowdown

The decline is what makes the newest release particularly interesting. Applications nationally dropped 7.8% in a single month, while projected employer formations declined 4.6%.

One month does not establish a trend, especially because business applications can fluctuate significantly. But the August retreat arrives at a moment when businesses are navigating a more complicated economic environment than the extraordinary startup period that followed the pandemic.

Borrowing remains expensive for many small companies. Labor costs have increased. Commercial rents, insurance and other operating expenses can be difficult to absorb.

At the same time, the incentive to start a business remains powerful.

Remote work has made some kinds of entrepreneurship easier. Online platforms allow tiny businesses to reach national customers. Population growth keeps producing new markets in expanding Sun Belt suburbs and cities.

And for some workers, starting a business is increasingly another form of employment rather than a traditional leap into entrepreneurship.

The Sun Belt advantage is not uniform

It would be easy to look at the four-state total and conclude that the entire Sun Belt is experiencing the same entrepreneurial boom. It is not.

Florida and Texas have enormous populations, so raw application totals naturally favor them. A smaller state can have a higher rate of applications per resident while producing far fewer applications overall.

States also differ dramatically in industry mix, business regulations, taxes, population growth and the types of companies being created.

And the quality of business creation matters as much as the quantity. A state producing thousands of one-person entities is experiencing something different from one producing new manufacturers, restaurants, medical practices and professional firms that quickly add employees.

That is why the next stage of the Census data is important. Business Formation Statistics follow the path from application to actual employer formation, allowing researchers to see how many proposed businesses ultimately begin paying wages. Monthly data are available at the national, regional and state levels, while annual application data extend down to individual counties.

A different map of American entrepreneurship

For decades, discussions of America’s business geography often revolved around established corporate centers such as New York, Chicago and California.

The startup map is increasingly broader. Florida and Texas have become enormous engines of new-business activity, while Georgia and North Carolina have developed their own rapidly expanding entrepreneurial economies.

Together, those four states producing roughly 28% of August’s applications is striking. But perhaps the more revealing number will come later.

Of the hundreds of thousands of Americans who filed paperwork in August with the intention of building something, the Census Bureau expects only a fraction to become employer businesses within the next year.

That transition — from an application to a company that actually pays workers — is where a business idea begins to become an economy.

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