States With the Most Small Business Firms and Workers – 2020 Edition

By Ben Geier, CEPF®

Almost 97% of all businesses in the U.S. have fewer than 500 employees. These small businesses are particularly imperiled by the COVID-19 pandemic and the ensuing economic crisis. To combat the challenges resulting from wide-spread closures and shelter-in-place orders, the U.S. government has implemented myriad coronavirus small business relief measures. SmartAsset endeavored to locate where small businesses may be most beleaguered and thus in need of this help.

We found the states with the most small business firms and workers by considering data on all 50 states for the following metrics: percentage of firms with fewer than 500 employees and percentage of workers employed by firms with fewer than 500 employees. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.

• Small businesses comprise the vast majority of businesses in each state. Across all 50 U.S. states, more than nine out of every 10 firms are small businesses. Even in Delaware, the state with the lowest percentage of businesses with fewer than 500 employees, more than 93% of businesses fall in this category.
• But large businesses employ at least one-third of workers in each state.  Though large businesses comprise less than 10% of the total businesses in each state, they still employ a sizeable percentage of their workforces. Even in Montana, where small businesses employ the largest percentage of workers, large businesses still employ 35% of the workforce.

1. New York

Despite being home to numerous large corporations, New York ranks second-highest overall for small business firms as a percentage of all firms, at 98.97%. New York has the 19^th-highest percentage of workers who work at a small business. Of the total 8,261,269 employees in the state, 4,110,264 – or 49.75% – work at a small business.

2. New Jersey (tie)

Right next door to New York, New Jersey ties with Montana for the No. 2 spot in our study. The percentage of small business firms out of all firms in the state is 98.24% – with 191,291 of the total 194,720 firms employing fewer than 500 workers. New Jersey ranks fifth-highest overall for this metric. Furthermore, 49.90% of all workers in the state work at small businesses, the 17^th-highest rate for this metric in the study.

2. Montana (tie)

Tied for the No. 2 spot with New Jersey, Montana has the highest percentage in the study of workers employed by small firms, at 65.26%. There are 376,565 workers in the state, and 245,758 of them work for small businesses. Montana ranks 21^st-highest in terms of the percentage of firms with fewer than 500 employees, at 97.22%.

4. Washington

Washington State finishes in the top 15 for both of the metrics in our study. It has the ninth-highest percentage of firms with fewer than 500 employees, at 97.98%, since 152,488 of the state’s total 155,625 fall into this category. Washington State also has the 14^th-highest percentage of small business workers, at 50.71%.

5. Oregon

Oregon ranks eighth in the study for its high percentage of workers at firms with fewer than 500 employees, at 54.57%. Meanwhile, it comes in 17^th for its relatively high percentage of small business firms out of total firms, at 97.52%. Oregon has 95,045 total firms, 92,692 of which have fewer than 500 employees. The state employs close to 1.60 million workers, approximately 871,000 of which work for small business firms.

6. California

Of the total 763,803 firms in California, 757,458 (99.17%) have fewer than 500 employees, the highest rate for this metric in our study. The state ranks in the middle of the study for the number of its total employees who work for small businesses, at 48.50%.

7. Louisiana (tie)

Tied for seventh place in our top 10, Louisiana is the highest-ranked Southern state in our study. It ranks 10^th-highest for its percentage of total workers who work for small businesses, at 53.60%. Louisiana has the 22^nd-highest rate in the study for its percentage of small business firms. Of the state’s 81,413 total firms, 79,143 – or 97.21% – have fewer than 500 employees.

7. Michigan (tie)

Tied with Louisiana for the No. 7 spot in our study, Michigan ranks eighth in terms of its relatively high percentage of small business firms out of total firms, at 170,733 out of 174,092, or 98.07%. The state ranks toward the middle of the study, at 24^th-highest, for its percentage of small business workers, at 49.03%.

9. Maine

Maine ranks sixth overall for the metric measuring the percentage of workers employed by small businesses, at 57.20%. It ranks in the bottom half of the study, at 30^th overall, for its percentage of small businesses, at 96.68%.

10. Oklahoma

Oklahoma wraps up our top 10, with the 13^th-highest percentage of workers who work for small businesses, at 710,271 workers out of a total 1,360,720 – or 52.20%. Furthermore, Oklahoma ranks in the middle of the study for its percentage of small business firms. There are 70,663 small business firms in the state of a total 72,912 firms – or 96.92%.

To find the cities with the most small businesses firms and workers, SmartAsset considered data for all 50 states across the following metrics:

• Percentage of firms with fewer than 500 employees. This is the percentage of small business firms.
• Percentage of workers employed by firms with fewer than 500 employees. This is the percentage of small business workers.

Data for both metrics comes from the Statistics on U.S. Business, which is tabulated using the Census Bureau’s 2017 County Business Patterns Survey.

• COVID-19 help is available. The government is doing a lot to help small businesses – and the individuals who work for them – through the economic downturn. See what your options are here, and make sure to take advantage of any that apply to you.
• Trustworthy advice is valuable in tough times. A financial advisor can help with both your small business and personal finances, especially now that the COVID-19 crisis is impacting the business world so greatly. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.

Questions about our study? Contact press@smartasset.com

Photo credit: ©iStock.com/Dan Rentea

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