and dynamics of sales or revenues, then being revenue active is important. The implication is that some flexibility is required conceptually, as well as in terms of measurement, for defining business existence, entry, and exit.

Administrative Definitions

There are two main administrative systems in the United States that define basic business units—the tax system and the unemployment systems. The former defines the basic legal forms of ownership: the primary tax filing entities for businesses are corporations, partnerships, S-corporations, and sole proprietorships (farm versus nonfarm). Each tax-filing entity is given a unique Employer Identification Number (EIN), and these reporting entities form the basis of the Business Master File (BMF) maintained by the Internal Revenue Service (IRS).4 This initial assignment of legal entities, as represented by the unique EINs, is fundamental to the collection of data on U.S. businesses. The BMF defines the universe of all nontax-exempt firms in the United States. Not only does the IRS produce statistics through its Statistics of Income program based on the EIN as the unit of analysis, but also the Census Bureau relies on EINs in their data collection programs.

In the U.S. system, a distinction is commonly made between tax-filing entities that are employers and those that are nonemployers. The latter are businesses with positive revenues but with zero employees (e.g., typically the self-employed or sole proprietors). This distinction is particularly important for data collections based on the Unemployment Insurance (UI) system (ES-202 program), as these include only employer firms. The Bureau of Labor Statistics (BLS) oversees the data collected from the state UI systems and organizes a national database of employers based on them. In the UI system, the legal entity is the UI account. However, through the Multiple Worksite Reports (MWR) system, data on each physical location of employment is obtained from UI account holders, and this allows establishment-level data to be constructed.

While the legal concept of a business as defined by the IRS is central to the U.S. statistical system, the EIN as a unit of analysis or as a statistical sampling unit is often inadequate. As noted above, the EIN is an administrative entity that may or may not correspond to a common conception of an ongoing business as a unified, centrally coordinated productive organization. First, the existence of an EIN does not necessarily mean the entity is an ongoing business. For example, an entity with the potential to become a


Many small businesses that are sole proprietorships file under Schedule C and use their Social Security number as their tax identifier. These firms may or may not have EINs. The restriction is that all employers must file for an EIN.

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