Owning a small business may just be the ticket to a better life, at least economically.
A recent U.S. Small Business Administration report released in January revealed that U.S. households that owned small businesses were far more likely to be high-income earners in 2007 than in 1998, with the largest percentage gain among those owning more than one business.
Business-owner households also had a higher probability of being in the top 50 percent in both income and wealth between 1998 and 2007 than households that didn't own businesses. But the rate of increase in income and wealth for business-owning households was about the same as that of households that did not own a business.
While the number of multiple-business-owning households declined between 1998 and 2007, households that owned any businesses were significantly more likely to be high-income earners in 2007 than in 1998. Less than 48 percent of small business owners were identified as high-income in 1998, while almost 59 percent of small business owners were classified as high-income in 2007.
Similarly, households owning a small business experienced an increased likelihood of being classified as high-wealth from 13.4 percent in 1998 to 23.7 percent in 2007.
The data comes from the 2007 Survey of Consumer Finances, and does not reflect the impact of the economic disruption of the last two years on the economy and small business owners.
The report noted that there were significant differences in the characteristics of households and businesses in 1998 and 2007. Specifically, household heads in 2007 were older, more likely to be from a minority group, better educated, higher-income earners, higher wealth holders, and more likely to own real estate than those in 1998.
The types of businesses operated by these household heads were relatively similar in 1998 and 2007, but the businesses were larger, more likely to be organized as partnerships (less likely to be organized as sole proprietorships), less likely to have been purchased, bought or invested in, and more likely to have been inherited in 2007 than in 1998.
To view the full report, download the PDF.
