Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1696589227841.pdf (United States)
FOR RELEASE AT 10:00 AM EDT, SEPTEMBER 18, 2023 BUSINESS FORMATION STATISTICS, AUGUST 2023 Release Number: CB23-153 Notice: The next annual update will be applied during the October 2023 monthly release, scheduled for November 13, 2023.

During the annual update, underlying NAICS codes are revised each year for the previous five years when more accurate and detailed NAICS codes may be available from administrative sources.
The Formation series are updated annually to revise information on business formations (firm births) from the Business Dynamic Statistics (BDS) program.

Also, seasonal factors are recomputed and applied during the annual update, resulting in revisions to our seasonally adjusted series.

September 18, 2023 — The U.S. Census Bureau announced the following seasonally adjusted business application and formation statistics for August 2023.
The Business Application Series describe the business applications for tax IDs as indicated by applications for an Employer Identification Number (EIN) through filings of the IRS Form SS-4.

The Business Formation Series describe employer business formations as indicated by the first instance of payroll tax liabilities for the corresponding business applications.
BUSINESS APPLICATIONS U.S. Business Applications: AUG 2023 Total High-Propensity With Planned Wages From Corporations 466,163 149,785 50,252 49,599 AUG 2023 / JUL 2023 -0.9%° -0.1%° 4.4%° 1.0%° Next release: October 16, 2023 (°) Statistical significance is not applicable or not measurable.

Data adjusted for seasonality.
Source: U.S. Census Bureau, Business Formation Statistics, September 18, 2023 Business Applications - At a Glance Source: U.S. Census Bureau, Business Formation Statistics, September 18, 2023 Total High-Propensity With Planned Wages From Corporations AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 US 466,163 -0.9% 149,785 -0.1% 50,252 +4.4% 49,599 +1.0% Northeast 69,184 +0.5% 23,852 -0.9% 6,798 +7.1% 11,023 -1.8% Midwest 76,790 -0.2% 23,720 +1.0% 8,890 +4.6% 6,251 +1.3% South 210,864 Z 65,044 +1.3% 21,928 +5.9% 17,379 +0.8% West 109,325 -3.9% 37,169 -2.6% 12,636 +0.5% 14,946 +3.3% Details may not equal totals due to rounding.
Regions defined by Census Bureau Geography Program.

Statistical significance is not applicable or not measurable.

Data adjusted for seasonality.

Green Percentage changes are greater than zero (+).

Red Percentage changes are less than zero (-).

Z = absolute value < 0.05. Business Applications Business Applications for August 2023, adjusted for seasonal variation, were 466,163, a decrease of 0.9 percent compared to July 2023.
Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 1 BUSINESS FORMATIONS U.S. Total Projected Business Formations: AUG 2023 AUG 2023 / JUL 2023 Within 4 Quarters Within 8 Quarters 32,717 42,254 1.7%° 0.9%° Next release: October 16, 2023 (°) Statistical significance is not applicable or not measurable.

Spliced - Data adjusted for seasonality.
Source: U.S. Census Bureau, Business Formation Statistics, September 18, 2023 Projected Business Formations - At a Glance Source: U.S. Census Bureau, Business Formation Statistics, September 18, 2023 Within 4 Quarters Within 8 Quarters AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 US 32,717 +1.7% 42,254 +0.9% Northeast 5,162 +0.9% 6,661 -0.1% Midwest 5,228 +1.2% 6,729 +1.0% South 13,063 +4.1% 16,981 +2.7% West 9,264 -0.9% 11,883 -1.1% Details may not equal totals due to rounding.
Regions defined by Census Bureau Geography Program.

Statistical significance is not applicable or not measurable.

Data adjusted for seasonality.

Green Percentage changes are greater than zero (+).

Red Percentage changes are less than zero (-).

Z = absolute value < 0.05. Business Formations Projected Business Formations (within 4 quarters) for August 2023, adjusted for seasonal variation, were 32,717, an increase of 1.7 percent compared to July 2023.
The projected business formations are forward looking, providing an estimate of the number of new business startups that will appear from the cohort of business applications in a given month.

It does not provide an estimate of the total number of business startups that appeared within a specific month.
In other words, the Census Bureau is projecting that 32,717 new business startups with payroll tax liabilities will form within 4 quarters of application from all the business applications filed during August 2023.

The 1.7 percent increase indicates that for August 2023 there will be 1.7 percent more businesses projected to form within 4 quarters of application, compared to the analogous projections for July 2023.
Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 2 Statistics on actual business formations are available up to the latest quarter for which administrative data identifies employer business startup activity based on first payroll observation, currently the fourth quarter of 2020.
Given the forward-looking nature of business formations, the Census Bureau can only state actual business formations within 4 quarters up to December 2019, and business formations within 8 quarters up to December 2018.

Projected business formations within 4 quarters start in January 2020 and projected business formations within 8 quarters start in January 2019 and both end in August 2023.
The most recent quarter for which administrative data on payroll is available is updated annually in the twelfth month based on new data on actual business formations.

For more information, see the explanatory notes later in this release or visit <https://www.census.gov/econ/bfs/technicaldocumentation/methodology.html>.
Source: U.S. Census Bureau, Business Formation Statistics, September 18, 2023 Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 3 Business Applications by Industry - At a Glance 21: Mining 22: Utilities 11: Agriculture 51: Information 23: Construction 44-45: Retail Trade 42: Wholesale Trade 31-33: Manufacturing 52: Finance and Insurance 48-49: Transportation and Warehousing US 5,066 -11.2% 464 -4.1% 611 +2.2% 47,514 -5.5% 6,852 -7.2% 10,422 -2.2% 78,585 +0.8% 32,973 -4.8% 8,838 +0.4% 19,023 +0.3% 25,176 -1.3% 60,492 +0.5% 4,470 +3.4% 35,994 +0.2% 6,596 +1.8% 28,441 +1.2% 13,769 -0.2% 26,130 -1.7% 40,526 -0.7% 14,220 +7.7% Details may not equal totals due to rounding.
Statistical significance is not applicable or not measurable.

Data adjusted for seasonality, except for Utilities (22).
AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 AUG 2023 AUG 2023 / JUL 2023 72: Accommodation and Food Services 62: Health Care and Social Assistance 55: Management of Companies 56: Administrative and Support 71: Arts and Entertainment 54: Professional Services 61: Educational Services 81: Other Services 53: Real Estate Unclassified Green Percentage changes are greater than zero (+).
Red Percentage changes are less than zero (-).

Z = absolute value < 0.05.

Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 4 Business Applications by Industry The Census Bureau classifies BFS data by industry using the North American Industry Classification System (NAICS).

NAICS codes are assigned using a variety of sources.
A Census Bureau-developed automated industry-coding program first attempts to assign NAICS codes to all new EIN applications received from the IRS.

The automated industry-coding program is based on established patterns in the business name and descriptions provided on the EIN applications.

This auto-coding process assigned NAICS codes to over 80% of all incoming EIN applications in 2020.
For applications that did not receive a NAICS code during the auto- coding process, BFS staff use a Census-developed machine learning algorithm to assign NAICS codes where possible.

NAICS codes are revised each year for the previous five years as part of the BFS annual update process when more accurate and detailed NAICS codes may be available from the Social Security Administration, the Bureau of Labor Statistics, and the Census Bureau's Business Register.
There are a small number of EIN applications where there is not enough information available to assign a NAICS code through any source.

For more information on the Census Bureau automated industry-coding program, please visit <https://www.census.gov/econ/bfs/pdf/naics_improvement.pdf>.
For more information on the machine learning algorithm, please visit <https://www.census.gov/content/dam/Census/newsroom/press- kits/2019/jsm/Using%20Machine%20Learning%20to%20Assign%20North%20American%20Industry%20Cla ssification%20System%20Codes%20to%20Establishments_Dumbacher.pdf>.
GENERAL INFORMATION On May 13, 2019, the IRS implemented a change in Form SS-4 requiring a social security number (SSN) or an individual taxpayer identification number (ITIN) for the responsible party indicated in the EIN application.

The change will prevent entities using their existing EINs to apply for additional EINs.

For more information on the requirement change, please visit <https://www.irs.gov/newsroom/irs-revises-ein- application-process-seeks-to-enhance-security>.
The form field that the change applies to is not one that the Census Bureau receives and it is not used in the analysis.

As a result, we cannot necessarily draw any conclusions on the impact of this change on BFS.

Release Schedule The September 2023 Business Formation Statistics Report is scheduled for release on October 16, 2023.

View the full schedule in the Economic Briefing Room: < https://www.census.gov/economic-indicators/>.
Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 5 Further information on BFS, including additional series and the full time span of the series listed above, can be found at < https://www.census.gov/econ/bfs>.
EXPLANATORY NOTES Business Formation Statistics (BFS) are a standard data product of the U.S. Census Bureau developed in research collaboration with economists affiliated with Board of Governors of the Federal Reserve System, Federal Reserve Bank of Atlanta, University of Maryland, and University of Notre Dame.

Business Formation Statistics (BFS) provide timely and high-frequency data on business applications and employer business formations.
BFS measure business initiation activity (Business Application Series) as indicated by applications for an Employer Identification Number (EIN) on the IRS Form SS-4.

BFS also provide information on actual and projected employer business formations (Business Formation Series) that originate from these applications, based on the record of first payroll tax liability for an EIN.
In addition, BFS contain measures of delay in business starts as indicated by the average duration between the application for an EIN and the transition to an employer business.

BFS currently cover the period starting from July 2004 onwards at a monthly frequency.

The data are available nationally, regionally, and by individual states.
Business Application Series These series describe the business applications for tax IDs as indicated by applications for an Employer Identification Number (EIN) through filings of IRS Form SS-4.

Business applications are presented in four different series reflecting different subsets of the applications for an EIN.

All business applications series cover the period from July 2004 onwards.
• Business Applications (BA): The core business applications series that correspond to a subset of all applications for an EIN.
This series includes all applications for an EIN, except for applications for tax liens, estates, and trusts, applications outside of the 50 states and the District of Columbia or those with no state-county geocodes, applications with certain NAICS codes in sector 11 (agriculture, forestry, fishing and hunting) or 92 (public administration) that have low transition rates, and applications in certain industries (i.e.

private households, certain financial services, civic and social organizations).
• High-Propensity Business Applications (HBA): Business Applications (BA) that have a high- propensity of turning into businesses with payroll.

The identification of high-propensity applications is based on the characteristics of applications revealed on the IRS Form SS-4 that Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 6 are associated with a high rate of business formation.
High-propensity applications include applications: (a) from a corporate entity, (b) that indicate they are hiring employees, (c) that provide a first wages-paid date (planned wages); or (d) that have a NAICS industry code in accommodation and food services (72) or in portions of construction (237, 238), manufacturing (312, 321, 322, 332), retail (44, 452), professional, scientific, and technical services (5411, 5413), educational services (6111), and health care (621, 623).
• Business Applications with Planned Wages (WBA): High-Propensity Business Applications (HBA) that indicate a first wages-paid date on the IRS Form SS-4.

The indication of a wages-paid date is associated with a high likelihood of transitioning into a business with payroll.

• Business Applications from Corporations (CBA): High-Propensity Business Applications (HBA) from a corporation or personal service corporation, based on the legal form of organization stated in the IRS Form SS-4.
Similar to the WBA series, this series is important primarily because it consists of a set of applications that have a high rate of transitioning into businesses with payroll.

The following is a graphical representation (Venn diagram) of the relationship between the four business applications series (BA, HBA, WBA, CBA) and EIN applications.

This graph does not represent the actual relative sizes of different groups.
Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 7 Business Formation Series These series describe employer business formations as indicated by the first instance of payroll tax liabilities for the corresponding business applications.
The business formation series are forward-looking in the sense that they measure new business formations from the month of business application in any given quarter.

Two series are provided: the first describes transitions within the next four quarters (12 months), and the second within the next eight quarters (24 months).

Payroll information is only available on a quarterly basis so it is only possible to look ahead in terms of quarters.
All business formation series start in July 2004, the earliest month for which the data on business applications are available.

• Business Formations within 4 Quarters (BF4Q): This series provides the number of employer businesses that originate from Business Applications (BA) within four quarters from the month of application.
By definition, the end-point of this series is determined by the most recent quarter for which the administrative data identifies employer business startup activity based on first payroll observation.

• Projected Business Formations within 4 Quarters (PBF4Q): The projected number of employer businesses that originate from Business Applications (BA) within four quarters from the month of application.
The projections are based on an econometric model that generates estimates of the likelihood that a business application turns into an employer business.

For the details of the model, see the working paper <https://www.census.gov/library/working- papers/2018/adrm/bfs_FEB2018.html>.

The projected business formation series cover the period for which the actual number of business formations within 4 quarters is not yet available.
Combining the projected series with the actual business formations (the BF4Q series) results in an up-to-date, forward-looking business formation series.

• Spliced Business Formations within 4 Quarters (SBF4Q): This series combines (splices) BF4Q and PBF4Q to provide the entire time series for the actual and projected business formations within 4 quarters.
• Business Formations within 8 Quarters (BF8Q): The number of employer businesses that originate from Business Applications (BA) within eight quarters from the month of application, similar to the BF4Q series.

Again, the end-point of this series is determined by the most recent quarter for which the administrative data identifies employer business startup activity based on first payroll observation.
Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 8 • Projected Business Formations within 8 Quarters (PBF8Q): The projected number of employer businesses that originate from Business Applications (BA) within eight quarters from the month of application, similar to the PBF4Q series.
The projected business formation series cover the period for which the actual business formations within 8 quarters are not yet available.

• Spliced Business Formations within 8 Quarters (SBF8Q): This series combines (splices) BF8Q and PBF8Q to provide the entire time series for the actual and projected business formations within 8 quarters.
• Average Duration (in Quarters) from Business Application to Formation within 4 Quarters (DUR4Q): A measure of delay between business application and formation, measured as the average duration (in quarters) between the quarter in which the month of business application falls and the quarter of business formation, conditional on business formation within four quarters.

These series span the same period as BF4Q.


• Average Duration (in Quarters) from Business Application to Formation within 8 Quarters (DUR8Q): A measure of delay between business application and formation, similar to the DUR4Q series.

The difference is that the window for business formation is eight quarters, rather than four.

The series span the same period as BF8Q.


Description of Seasonal Adjustment Because of strong seasonality detected in most of the business application and formation series, all series are provided with and without seasonal adjustment.

In the case of the duration series (DUR4Q and DUR8Q), seasonality is not significant in general.

Therefore, no seasonally adjusted duration series are provided.
All data, with the exception of the industry data, is seasonally adjusted at the state level and summed to create seasonally adjusted United States total and regional data.

Industry data, except for Utilities (22), is seasonally adjusted at the national level to create adjusted United States total data.

Seasonal adjustment is performed using the X-13ARIMA-SEATS seasonal adjustment program of the US Census Bureau.

Users can implement their own seasonal adjustment methods using the unadjusted data.
Reliability of Estimates The statistics presented in this release are based on administrative data and therefore are not subject to sampling error.

There is also projection error associated with the projected business formation series.

The statistics may also be subject to non-sampling error.

Non-sampling error occurs because accurate information cannot always be obtained.
There are many potential contributors to nonsampling error – Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 9 misreporting, mistakes in recording and coding responses, misinterpretation of questions, and other errors of collection, response, coverage, or processing.
Though nonsampling error is not measured directly, the Census Bureau employs quality control procedures throughout the process to minimize this type of error.

Notes Technical documentation for these statistics and specific recommendations for interpreting these statistics are described on the product's webpage < https://www.census.gov/econ/bfs>.
The Census Bureau has reviewed this data product to ensure appropriate access, use, and disclosure avoidance protection of the confidential source data (Project No.

P-7515311, Disclosure Review Board (DRB) approval number: CBDRB-FY23-0139).

RESOURCES API The Census Bureau’s application programming interface lets developers create custom apps to reach new users and makes key demographic, socio-economic and housing statistics more accessible than ever before.
<https://www.census.gov/developers/> FRED Mobile App Receive the latest updates on the nation’s key economic indicators by downloading the FRED App <https://fred.stlouisfed.org/fred-mobile/> for both Apple and Android devices.

FRED, the signature database of the Federal Reserve Bank of St. Louis, now incorporates the Census Bureau’s 13 economic indicators.
Data Inquiries Economic Indicators Division, Business Formation Statistics 301-763-2000 eid.bfs@census.gov Media Inquiries Public Information Office 301-763-3030 pio@census.gov 10