The U.S. Small Business Administration has dubbed April 29th through May 5th “Small Business Week”, and while many commemorative “weeks” are celebrated each year, this one is particularly impactful for the Family Business Coalition. Small Business Week celebrates the 30 million entrepreneurs across the country that support the vast majority of American workers. While 60% of U.S. workers are employed by small businesses, the overwhelming number of those small businesses are family owned and operated.
Family businesses are America’s economic engine, accounting for nearly 78% of all new job creation. Small businesses, including many family firms, employ just over half of US workers. Of 113.4 million non-farm private sector workers in 2011, businesses with fewer than 500 workers employed 55 million individuals, and large family businesses employed 58.4 million. Firms with fewer than 20 employees employed 20.2 million. Nearly 35 percent of Fortune 500 companies are family-controlled, and many of them grew from small, “Mom and Pop” operations to large enterprises employing tens of thousands of people.
Family businesses don’t just create jobs, they also create wealth. In a 2017 survey of 222 of mid-sized, family-owned businesses, approximately 70% of the respondents represented companies with revenues of $200 million or more. 25 percent were with companies generating revenues of $500 million or more. Much of that money is recycled back into the business, employing more people, raising wages, and bolstering local economies.
Family businesses foster diversity. Over the past five years, woman-owned family businesses have increased by 37%. Currently, 24 % of family businesses are led by a female CEO or President, and 31.3 % of family businesses surveyed indicate that the next successor is a female. Nearly 60 percent of all family-owned businesses have women in top management team positions.
Family businesses still face big issues. Nearly 70% of family businesses would like to pass their business on to the next generation, only 30% will be successful at transitioning to the next generation. Outdated and burdensome taxes like the estate tax siphon critical capital away from family businesses, forcing families into costly estate planning. It makes no sense to require grieving families to pay a confiscatory tax on a deceased business owner’s life’s work. Far too often this tax is paid by selling assets or the business itself. Other times, employees of the business have wages cut or are laid off completely. President Trump’s tax reform reduced the impact of the death tax, but it lives on to hurt future generations of family businesses.