How the Census Bureau devalues Black businesses

Black Enterprise, June, 1996 by Margaret C. Simms

While the black business sector cannot solve all the employment problems of our communities, its behavior indicates that it is more willing than its white counterpart to recruit in low-income neighborhoods and to employ black workers.

The jobs that minority- and black-owned businesses provide are competitive in many respects: these are full-time jobs with benefits and training opportunities. Some types of firms seem to offer more opportunities to low-skilled workers with less education (e.g., manufacturing firms in the central city). Similarly, there are location-related differences. Central city firms seem more likely to recruit in and employ people from low-income neighborhoods.

RELATED ARTICLE: WHY THE CENSUS BUREAU CAN'T COUNT

When the U.S. Census Bureau--or any research organization--attempts to measure the size and impact of minority businesses, one of the toughest challenges is to define and determine the race of the business owner. The Census does not conduct direct surveys of businesses owners to determine this; rather, they pore over administrative data that can be gleaned from analyses of individual income tax filings, for example, to identify those businesses which are black-owned.

The problem with this is that it is much mare difficult to discern that a business is black-owned using the corporate tax filings required of Subchapter E corporations (the legal form of business more common among larger enterprises) than other legal forms common among smaller firms, such as sole proprietorships, general partnerships and Subchapter S corporations. The latter group must file business income an the personal tax returns of the owner or owners. (A brief glossary of legal forms of incorporation is listed below.)

The Census approach to this dilemma? Rather than guess it doesn't count Subchapter E corporations because of the difficulty of linking race demographics to these businesses--leaving the largest minority-owned businesses out in the told. BE Economist Andrew grimmer proposed that he and his fellow board members urge the Census to come up with a better way. He asks, "Why can't the Census sample black firms?

"In other words, account far as many black firms as they can [using their current methods] and then directly survey those firms which would be extruded by that method," he explains. "The consequences of continuing to pursue the methodology they are now pursuing is that they will increasingly underestimate the number and the impact of black businesses."

SOLE PROPRIETORSHIP

Owner maintains complete control over the business and is solely liable for all business debts. His or her personal assets are open to attack in any legal case. Owner reports all income and expenses an personal tax return.

GENERAL PARTNERSHIP

Each partner has the authority to enter contracts and make other business decisions, unless the partnership agreement stipulates otherwise. Each partner is liable far all business debts. Each partner reports partnership income on individual tax return; the business does not pay any taxes as its own entity.