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(KNSI) – New business filings are up amid the COVID-19 pandemic in the St. Cloud area and across Minnesota.

In 2020, the Minnesota Secretary of State’s office recorded 47,464 new business filings for limited liability companies in the state, a 15 percent increase over LLCs filed in 2019. Between January and May 2021, Minnesotans filed 26,413 new LLCs, a 47 percent increase above the number of LLCs filed in that same five-month span in 2019.

Luke Greiner, a regional labor market analyst for the Minnesota Department of Employment and Economic Development, says that in Region 7W (Benton, Sherburne, Stearns and Wright counties), 3,317 new business filings were made 2020, a 13.1 percent increase from 2019.

This year, Minnesotans have also submitted new business filings for 2,385 business corporations, 1,229 nonprofit corporations and 274 limited liability partnerships.

However, just because someone has filed an application for a new business does not necessarily guarantee that it will get off the ground, open up and start selling goods and services.

“If there’s 100 applications, that doesn’t necessarily mean there’s going to be 100 new businesses,” Greiner said.

Greiner says that new business applications are separated into two categories: high-propensity applications and non-high-propensity applications. High-propensity applications have a high likelihood of becoming an operating business. The percentage of high-propensity applications among all business applications in Minnesota is lower now than it was before the pandemic, Greiner said.

“The ones that are classified as high-propensity, meaning they’re likely to come to fruition, is much lower as a percentage than what we saw pre-pandemic,” Greiner said. “The share that don’t become a business looked to be quite high compared to normal.”

He adds that some of Minnesota’s new business filings could be business owners who closed a business last year and are trying to start a new venture in a different sector.

Before the pandemic, Minnesota’s entrepreneurship rate was on the decline. Data from the Kauffman Indicators of Entrepreneurship say in 2017, Minnesota’s new entrepreneurs made up 0.3 percent of the state population. For 2019 and 2020, the percentage of new entrepreneurs came in at 0.18 percent. For comparison, Tennessee and Colorado — which are similar to Minnesota in terms of gross domestic product — had 0.35 percent of their respective populations start new businesses in 2020.

Though new entrepreneurship rates are relatively low, most Minnesotans who start a new business (66.47 percent) do so by choice, not necessity, according to data from Kauffman. Also, new startups in Minnesota have an 80.13 percent chance of staying active after one year in business and create an average of 3.6 jobs in that first year.

Survivability for new businesses now may vary depending on which sector they are in and how hard the pandemic hit that sector, Greiner says, but competing against established businesses for workers could be a struggle for all new ventures.

“It’s definitely going to be competitive, even as a smaller share of these [new businesses] come to fruition but it’s still a large number compared to what we’ve historically seen, [those are] new businesses that are going to be competing against current businesses,” Greiner said. “For out-of-work job seekers, for people joining the labor market, for students graduating high school and college, people moving here, it’s terrific because it gives you leverage in the labor market. But, it also makes it difficult for employers that are in our area.”

Other issues impacting the workforce, like transportation and childcare, have been intensified by the pandemic.

“I don’t really see anything glaringly different than 2019, as far as the labor market. What I see is a lot of those frictions and problems, issues, just exacerbated,” Greiner said. “We’re kind of staring down the same problems that were heightened over the last year. Hopefully the dust will settle and things will shake down and hopefully get us back to where we were in 2019 as far as trying to overcome some of these issues.”

As far as nonemployee establishments — AKA self-employed businesses — Greiner says the data on how many people became self-employed during the pandemic isn’t available yet, but self-employment in the area has been on a continual decline for a while.

“Hopefully, if we do see a bump in it, it’s not a bump out of necessity,” Greiner said. “Hopefully, we see a spike in nonemployers because there’s opportunity, not necessarily because they can’t find a job. … In our labor market, if we do see a spike in nonemployers, I’m fairly comfortable saying that’s what it’s going to be, because there’s ample opportunities — we have record numbers of job openings.”

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