Business formation boosts job formation

A recent study from the Kauffman Foundation showed that the nation’s top-performing, young businesses create 40 percent of new jobs in the U.S. in any given year. In light of this, Dane Stangler, author of High Growth Firms and the Future of the American Economy spoke with BusinessWeek about how entrepreneurs might benefit from these statistics.

To start, Stangler’s study shows that without startup companies, net job creation in most years would be negative. He says these findings should be a major incentive for officials to boost business formation. "If we encourage people to start more new companies in general, we can expect that some of them will turn into gazelles that add large numbers of new jobs."

Stangler believes increased access to capital might be the best way to break down business formation barriers. While he admires the administration’s recent allocation of $30 billion for community banks to increase lending to small business, he thinks young businesses need more assistance now in light of a trying economy.

Moreover, Stangler referenced a study by the Miklen Institute that showed lower corporate tax rates would boost business incorporation and have "expansionary effects on the U.S. economy."

Entrepreneurs might find that the study – and Stangler’s remarks – help bring capital for startup business ventures soon. In the meantime, the government has already taken measures with the recently approved Small Business and Infrastructure Jobs Tax Act to increase tax credits for startup companies.