With multiple unfilled job openings behind them and economic storm clouds ahead of them, Coloradans filed to create a record number of new businesses last quarter, according to a report Monday from Colorado Secretary of State Jenna Griswold and the University of Colorado Boulder’s Leeds. Department of Business Research.
Time will tell whether the state is headed for a ravaging armada of entrepreneurs or a bright economic future of adventurers, but the fourth quarter saw an unprecedented 48,806 new entity filings, a 37.2% increase from the fourth quarter of 2011, and a. jump from the third quarter.
Most of the fourth-quarter filings, 42,003, were for limited liability companies, the type of business entity preferred by sole proprietors. They rose 50.2% over the past year, more than triple the average annual growth rate of 15.2% over the past five years.
For the year, the state calculates 175,650 new business filings in 2022, an 11.5% increase from 2021.
“With another strong year of employment gains and continued job growth, new business entity filings growing at a record pace and inflation slowing faster than the national average, Colorado leads the way when it comes to owning and operating a business,” Griswold commented. said with quarterly updates.
New business filings signal optimism about the future. People are less likely to launch a venture when they think the bottom line is set to drop out of the economy and their efforts will be wasted. A certain percentage of startups will reach the point where they can add jobs, so the measure is a good predictor of future job growth.
That said, the choice is not always voluntary, and periods of high layoffs often coincide with booms in business startups. But that is not the current situation. According to the Colorado Department of Labor and Employment, the state’s unemployment rate ended 2022 at a historically low 3.3%, and employers added 8,600 jobs last month and 104,700 last year, a very strong showing.
Jobs are plentiful for those who want to work, and employers are desperate to hire. So why start a business, especially when supply-chain issues are still a problem, borrowing money is more expensive and some forecasts are calling for a recession this year?
One factor that hasn’t reared its head in four decades is inflation, which was running at 6.9% in metro Denver in November. Higher prices may force more people to look for ways to increase income. Starting a business or side gig can offer more flexibility and upside than taking on a second job.
It’s also worth noting that the state has broken fees for new business filings, reducing them from $50 to $1. But given the money and effort required to launch a legitimate business, that $49 savings probably isn’t a deciding factor.
There were also signs of economic recession. Business liquidations came in at 13,293, an increase of 17% year-on-year, while the number of delinquent businesses rose 9.7% year-on-year to 798,981. But those gains were not matched by the measure of optimism represented by increased new business filings.