Actual Business Formations (4-Quarter): 25,080 in Q4 2022
Business Formations at 25,080 in Q4 2022. Up 2.3% year-over-year.
Business Formations -- Historical Chart
Business Formations (4 Quarters). Gray shaded areas indicate U.S. recessions.
Source: Federal Reserve Bank of St. Louis (FRED), Series BFBF4QTOTALSAUS. Updated 2026-03-09.
What the Q4 2022 Data Shows
At 25,080, business formations in Q4 2022 is above the 10-year average of 24,412 by 668. The trend is upward, with increases in 3 of the last 4 quarters.
While business applications measure entrepreneurial intent, this series measures outcomes. The Census Bureau matches EIN applications against IRS payroll tax records to determine which applications actually resulted in a business hiring employees within four quarters. The result is the most concrete measure of business formation available in U.S. economic data.
Because the Census Bureau needs four quarters of payroll data to confirm a formation, this series has a longer reporting lag than applications. The tradeoff is accuracy: you know these businesses actually opened, hired people, and ran payroll. This makes the data especially valuable for economic development analysis and small business lending market sizing.
Series BFBF4QTOTALSAUS is reported quarterly and covers all 50 states.
What This Metric Measures
This page tracks the number of new business applications that actually resulted in a business with payroll activity within four quarters of the application date, as confirmed by the Census Bureau matching EIN applications to IRS payroll tax filings. The data comes from the Federal Reserve Bank of St. Louis FRED database, series BFBF4QTOTALSAUS, updated quarterly.
Historical Context
The all-time peak was 38,826 in Q4 2005 — roughly 1.5x the current level. The all-time trough was 14,093 in Q2 2020. During COVID-19, the reading hit 26,940 (Q3 2020). Year-over-year, the metric has moved +2.3%.
Why It Matters
For small business lenders, the formation count is the denominator that makes the lending market real. Each confirmed formation represents a business that will need a checking account, a credit card, insurance, and probably a loan within its first two years. The formation-to-application ratio also reveals how healthy the startup ecosystem is: a falling ratio signals that capital access or regulatory burden is killing businesses before they open.
What This Means for Business Owners
Understanding where this metric stands relative to historical norms helps business owners make better borrowing decisions. When business formations is above its 10-year average, it signals changing conditions in the credit markets that affect both cost and availability of financing.
Business Formations -- Frequently Asked Questions
A business application is an EIN filing with the IRS -- an expression of intent. A formation means the Census Bureau confirmed the business actually started payroll within four quarters. Only 20-30% of total applications result in confirmed formations.
The current reading is 25,080 for Q4 2022. Pre-pandemic quarterly formations averaged roughly 220,000-250,000. The post-2020 surge pushed this to 300,000+ per quarter, though the level depends on how many applications convert.
The Census Bureau must wait four quarters after an application to check IRS payroll records. This means the latest formation data is always 12-15 months behind the latest application data. The tradeoff is that formations are confirmed, not estimated.
Only businesses that show payroll tax activity within four quarters of their EIN application. Sole proprietorships without employees, dormant LLCs, and shell entities are excluded. This is strictly employer businesses.
New employer businesses contribute directly to GDP through hiring, purchasing, and producing. Research from the Kauffman Foundation shows that firms less than five years old account for nearly all net new job creation in the U.S. economy.
FRED series BFBF4QTOTALSAUS from the Census Bureau's Business Formation Statistics program. The Census Bureau matches EIN applications to IRS payroll tax filings to confirm actual business activity. Quarterly release.