Despite the ongoing COVID-19 pandemic, the Bluegrass State’s economy experienced unprecedented growth in 2021. For the first time in the state’s history, new and expanding projects in the private sector topped $10 billion. These developments are set to rake in more than 15,200 full-time jobs.
The Kentucky economy would not have made these gains if not for the effort that small business owners have shown over the years. They employ close to half of the state’s workforce and export goods worth $3.5 billion, thus boosting Kentucky’s annual GDP.
Here are a few statistics that shed a light on Kentucky’s small business landscape.
Quick Kentucky Small Business Statistics for Entrepreneurs
- 99.3% of all businesses in Kentucky are small businesses.
- Small business employees represent 43.6% of all employed workers in the state.
- Military veterans make up 5.2% of workers and own 7.7% of small businesses in Kentucky.
- Ethnic minorities account for 11.5% of workers and 7.7% of small business owners.
- In the 2021 CNBC “Top States for Business” report, Kentucky ranks 41st out of 50 states.
- With $3.64 million in investments, the Kentucky Cabinet for Economic Development incentivized 107 Kentucky small companies in 2021, actively helping them create 339 new jobs.
- Retail trade is the third-largest sector in terms of small business investment, with 37,533 small businesses operating within the sector.
- By October 2021, Kentucky had the second-highest job opening rate in the country, with 167,000 unfilled jobs representing 8.2% of its workforce.
- Women account for 47.9% of workers and 40.4% of small business owners.
- Kentucky small business employment increased by 5.1% between 1994 and 2018, reaching 716,731 employees in 2018.
Kentucky Small Business Statistics
1. What is considered a small business in Kentucky?
According to the US Small Business Administration, this definition varies widely by industry, revenue, and employment. But generally, a small firm has less than 500 workers (in the manufacturing industry) and less than $7.5 million in annual revenue (in the majority of nonmanufacturing industries).
There are currently 360,756 small businesses in Kentucky that represent 99.3% of all businesses in the state.
2. How many people are employed by small businesses in Kentucky?
Small businesses employ approximately 716,731 Kentuckians. That’s 43.6% of all employees in the state.
The minimum wage is $7.25 (the same as the federal minimum wage). Some employees, such as tipped workers, high school and college students, and some workers with disabilities, are excluded from being paid the minimum wage provided they receive a certificate from the Kentucky Department of Labor.
3. Kentucky small business statistics by industry
The construction industry has the highest number of small businesses operating in it, a total of 47,208 firms. Out of this number, 39,918 have no employees, 6,565 have 1–19 employees, and 725 have 20–499 employees.
The utilities sector is the smallest in terms of small business investment, with only 232 firms working in it.
4. Kentucky small business ownership by ethnicity
There are 4,509,394 residents in Kentucky. White/Caucasian Americans are the majority ethnic group, representing 87.5% of the population. They are followed by Black/African Americans (8.5%), Hispanic/Latino Americans (3.9%), Asian Americans (1.6%), American Indian and Alaska Natives (0.3%), and Native Hawaiian and Other Pacific Islander (0.1%).
Small business ownership is distributed among these ethnicities as follows:
- White/Caucasian — 319,303
- Black or African American — 16,159
- Hispanic — 8,699
- Asian — 8,899
- American Indian and Alaska Native — 350
- Native Hawaiian and Other Pacific Islander — 100
5. Kentucky small business ownership by gender
Men own approximately 206,019 small businesses in Kentucky. Of these, 166,000 are nonemployer businesses, while 40,019 have employees. Women own 123,312 small businesses in Kentucky, 113,000 of these have no employees and 10,312 have employees on payroll.
There are, however, 16,414 small businesses owned by both men and women.
6. Business taxes in Kentucky
Kentucky ranks 18th out of 50 states in the Tax Foundation’s 2022 Business Tax Climate Index. That’s a 19-point improvement from 37th place in 2017. In recent years, the Kentucky legislature has made significant efforts to improve the competitiveness of the state’s tax structure.
Competition from neighbors, such as Indiana and Tennessee (which rank ninth and eighth, respectively), is heating up, but much more has to be done to secure Kentucky’s economic future.
With Indiana’s low individual income tax rate of just 3.23% and Tennessee’s nonexistent individual income tax, Kentucky’s income taxes, which are now set at 5%, must become more competitive. Lower income taxes can help to foster population growth, as well as personal income and GDP growth.
7. Small business financing in Kentucky
Here are a few sources of capital for entrepreneurs in Kentucky:
- LiftFund: This is a nonprofit organization with facilities all over the country, including one in Kentucky. The group especially assists women and minority business owners in Lexington, Richmond, and other parts of Kentucky in obtaining operating capital, microloans, and educational opportunities. Smaller business loans from Liftfund vary from $50,000 to $1 million.
- Capital Access Corporation: In the state of Kentucky, Capital Access Corporation is the main provider of SBA 504 loans. A 504 loan is a commercial real estate loan that permits firms to acquire property or equipment. A 504 loan has a maximum loan size of $5 million, and the greatest part is that the interest rate is set for 10, 20, or 25 years. Projects receiving a 504 loan must also encourage economic growth and employment creation.
- Kentucky Economic Development Finance Authority (KEDFA): KEDFA offers small business loans to small businesses in the industrial, agricultural, service, and technology industries. The KEDFA loan can provide up to $100,000 to eligible firms. These small business loans have terms ranging from 3 to 10 years, and interested business owners with fewer than 50 workers should consider applying. Also, another condition is that within one year of receiving the loan, a business must create at least one full-time job.
8. Small business challenges in Kentucky
Here are some problems that plague small businesses in Kentucky:
- Burden of Compliance: Small businesses in Kentucky are subject to the same filing requirements as medium and large corporations. All businesses must identify which taxes apply to them, collect, collate, and assemble tax return information, calculate anticipated payments, and prepare and file tax returns on time, in addition to making timely payments. Small firms, in particular, must comply with fewer resources than bigger businesses. All this can be quite overwhelming for a small business owner.
- Labor Shortage: Kentucky has the second-highest job opening rate in the nation, close behind Alaska. There were around 167,000 unfilled jobs towards the end of 2021. The high number of job vacancies is exacerbated by the highest rise in people leaving their jobs compared to any other state. In August 2021, the “quit rate” climbed in 14 states, including Kentucky, where an estimated 84,000 Kentuckians quit their occupations, a 26,000 person increase over the previous month.
In order to stay on top of your business taxes in Kentucky, you need to hire a reputable registered agent that will not only assist you with your tax filing process, they’ll also send timely reminders so that you don’t miss any important filing dates.
Read my review of the best registered agents in Kentucky to find out which agent is best for your business.
9. Kentucky small business export statistics
In 2019, a total of 4,688 reported businesses exported items totaling $31.5 billion from Kentucky. Small businesses accounted for 3,686 of those exporters, or 78.6%. Small businesses shipped items worth $3.5 billion, accounting for 11.1% of total business exports.
The Final Word
Small businesses are critical to the financial health of the Kentucky economy. Because they account for nearly all employer firms in the state, their contribution is critical to economic growth. Small business owners, as entrepreneurs and inventors, represented a broad group in 2021 and continue to keep the state’s economy alive.
- US Bureau of Labor Statistics
- Kentucky Living
- The Fox Magazine
- US News
- Spectrum News
- Electric Choice
- US Census Bureau
- Tax Foundation
- US Small Business Administration