Entrepreneur

What business owners make

The middle and top are Census medians for 2024: people who worked their own business full time, all year. Many owners make less, and many earn nothing while the business is new. The low end is the average profit on a sole proprietor's tax return in 2022, about $13,000, which includes side businesses. A small number of founders make millions, but they are not the typical case.

Your first year

Equipment, rent, software and stock come first. Many founders keep a job, live on savings or rely on a partner's income for the first one to two years.

The survival odds

Of private businesses that opened in March 2013, 79.6% were still open a year later, 50.6% after five years and 34.7% after ten years, according to the BLS (Bureau of Labor Statistics).

What it costs to start

Sole proprietorship

$0 to register in most states, though a trade name filing may cost a little

Limited liability company

About $50 to $500 to file with your state, plus yearly fees in some states

Employer identification number

Free from the IRS (Internal Revenue Service)

Local business licence or permit

Often $50 to $400, depending on city and trade

Equipment, stock and a lease

From $0 for a service to tens of thousands for a shop

Roughly, all in

$100 to $30,000

Tuition, fees, exams and kit. Not rent, food or travel

The low end is a service business started from home: a state filing for a limited liability company, a website and a few tools. The high end is a business that needs equipment, stock or a lease before it can sell anything, such as a food truck or a small shop. A degree is not required and is not counted. Many businesses cost far more than $30,000 to open, and the money usually comes from your savings or a loan you personally guarantee.

Avoid paid services that charge hundreds to file forms you can file yourself on your state's website.

Where the money comes from

• Bootstrapping

  Your savings and early sales. This is how most small businesses start.

• SBA (Small Business Administration) microloans

  Up to $50,000 through local nonprofit lenders. The average is about $13,000, at roughly 8% to 13% interest.

• SBA (Small Business Administration) 7(a) loans

  Bank loans the government partly guarantees, for larger amounts. You usually need a plan, some cash in and good credit.

• Friends and family

  Common and risky. Put the terms in writing.

• Venture capital

  Investors buy part of your company in exchange for cash. Only a tiny share of businesses ever raise it, mostly fast-growing tech startups.

How to become an entrepreneur in the United States

No degree or licence is required to start a company. Most successful owners learned the industry first.

1. 1

   Learn an industry from the inside

   1 to 10 years

   Work in the field you want to start in. Most lasting businesses come from someone who knew the customers and the costs.

2. 2

   Test the idea cheaply

   1 to 6 months

   Sell to real customers before you spend on a lease, an app or stock. A paying customer is the only real proof.

3. 3

   Register and set up

   1 to 4 weeks

   Choose a structure, register with your state, get an employer number, open a business bank account and check local licences.

4. 4

   Survive the first years

   1 to 5 years

   Watch cash every week. Most businesses that close run out of cash, not ideas.

5. 5

   Pay yourself properly

   Ongoing

   A business that pays you a fair wage plus a profit is the goal. Many never get there; some sell or close and go back to a job.

School subjects that help

• Math

  Pricing, margins, cash flow and loan interest. This is where most owners get hurt.

• Accounting or business

  Reading a profit and loss statement and knowing which costs are fixed.

• English

  Selling, writing to customers and negotiating with suppliers.

• A trade or technical class

  Many of the most stable small businesses are skilled trades and services.

Time and money, at a glance

Time before the typical survivor pays themselves a living

1 to 5 years

Entry requirements

None to start. Some trades and professions need a licence first

Cost to start

$100 to $30,000 or far more

Paid while learning?

Yes if you learn in a job first. Rarely in the first year of the business

Registering a business

A sole proprietorship starts the day you sell, with no filing, but you are personally on the hook for every debt. A limited liability company is filed with your state and keeps business debts separate from your own in most cases. Most states let you use a different trading name with a short filing. You report profit to the IRS (Internal Revenue Service) and pay self-employment tax of about 15.3% on top of income tax. Check your city and county for licences, and your state for sales tax registration.

When you do need a licence

Starting a company needs no licence. Some kinds of work do: electricians, plumbers, contractors, hairstylists, food businesses, child care, real estate and financial advice all need state or local licences or inspections. If you sell food, plan for a health inspection and a permit. If you hire, you must register as an employer, withhold taxes and carry workers' compensation insurance in almost every state.

Help that costs little or nothing

• SCORE (a nonprofit network of volunteer business mentors)

  Free one-on-one mentoring from retired and working business owners, supported by the SBA (Small Business Administration).

• Small Business Development Centers

  Free advising on plans, loans and taxes, usually hosted at a local college or university.

• Community college courses

  Short, cheap classes in bookkeeping, marketing and business law.

• An industry association

  Where you learn real prices, suppliers and what customers expect.

Nice-to-haves

• Six months of savings

  So one slow month does not force you to close or borrow at a bad rate.

• A bookkeeper or accountant

  A few hundred dollars a year can save you from tax penalties and bad decisions.

• A co-founder with different skills

  One person who builds and one who sells is a common strong pair.

• A first customer before you launch

  Preorders, a signed contract or a pilot. It changes how lenders see you, too.

Startups are a different game

A startup in the tech sense is built to grow very fast and is usually funded by investors who expect most of their bets to fail. Founders often pay themselves little for years and own a share that is worth nothing unless the company is sold or goes public. TikTok and YouTube show the winners. For most people, a small business that makes a steady profit is the more realistic goal.

What an entrepreneur does day to day

There is no typical day, which is part of the appeal and the strain. In one morning you might quote a job, chase an unpaid invoice, fix a broken website and train a new hire. Afternoons go on the actual work customers pay for. Evenings are bookkeeping, ordering and answering messages. In the early years, the owner is also the sales team, the support team and the cleaner.

The honest pros and cons of being an entrepreneur

Work life

Typical hours

50 to 60 a week or more in the early years

Remote work

Depends on the business

Physical demand

Low to high, depending on the trade

Income stability

Low at first, can become steady

Similar paths

• Management ConsultantCompanies hire you to study a problem they cannot fix themselves, then tell them what to do about it. Long hours, fast learning, good pay.
• Product ManagerDecide what a product should do next, then get engineers, designers and the business to agree.
• Accountant (CPA)Count, check and explain the money. A four year degree, one hard exam, and a job in every town.

One in three makes it to ten years

Of the US private businesses that opened in March 2013, 34.7% were still operating in March 2023. The biggest drop came in the very first year.

There are about 31 million sole proprietor tax returns

For tax year 2022, about 31.0 million US tax returns reported a business with no corporation. Together they made about $410.7 billion in profit, an average of roughly $13,000 each.

Incorporated owners earn more

In 2024, full-time owners of incorporated businesses had median earnings of $71,942, compared with $47,420 for full-time owners without a corporation and $60,908 for full-time private company employees.