Pass-Throughs, Corporations, and Small Businesses: A Look at Firm Size [March 15, 2018]   [open pdf - 610KB]

"Small businesses have always been of interest to Congress when discussing tax policies to promote economic growth and job creation. Within these discussions it is common to equate, or at least associate, 'small' businesses with pass-through businesses (e.g., sole proprietorships, partnerships, limited liability companies, S corporations). An obvious question is then, are all small businesses also pass-throughs? Relatedly, are all large businesses also C corporations? Answering these questions may help to better target particular tax, and non-tax, policies. This report uses 2015 U.S. Census data to investigate how the size of businesses varies by legal form (corporate and pass-through), as well as the distribution of employment across firm types. Firm size is measured by using employment. The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA).1 Thus, it appears that based on an employment-based measure of size most businesses were small, with the exact share depending on the definition chosen."

Report Number:
CRS Report for Congress, R44086
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