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A deadly recession for many Wisconsin businesses

May 12, 2011


Ron Wirtz Editor, fedgazette
A deadly recession for many Wisconsin businesses

Wisconsin business, we barely knew ye.

That might be the funeral theme for many businesses that were incorporated—and subsequently unincorporated—in the land of cheese during the past four years. Those interested in starting a business must register with their home state under a variety of legal classifications (corporation, limited liability, partnership, etc.).

Few states track the active status of registered businesses over time. Wisconsin is one exception. Statutes allow the state to administratively dissolve entities that fail to file their required annual report, and it has an ongoing program to do just that, according to a state source.

Figures from the Department of Financial Institutions (provided at paid request), show a huge spike since 2007 in the number of mergers, dissolutions and otherwise defunct business registrations taken off state books (see Chart 1). This is particularly the case with corporations and LLCs, which make up the large majority of business registrations.

WI small biz -- 5-12--11 

The recession had the opposite effect on new business registrations. The annual number of new LLCs, for example, skyrocketed from the late 1990s until about 2006 (see Chart 2), due largely to changes in Wisconsin law (and laws in many other states) giving greater legal protection and tax advantages to sole proprietors and others organized as LLCs. But by 2007, LLC registrations leveled off and subsequently fell. The number of corporation filings also fell, but that merely continued a trend started well before the recession (see Chart 2).

WI small biz CH 2 -- 5-12--11 

On net, the state witnessed an 8 percent decline in the annual number of registered businesses from 2008 to 2010—the first such decline in at least a decade, and likely much longer given the general strength of the economy in the 1990s.

Much more research on birth and death trends among businesses across the Ninth District will be published in the July issue of the fedgazette. 

Ron Wirtz
Editor, fedgazette

Ron Wirtz is a Minneapolis Fed regional outreach director. Ron tracks current business conditions, with a focus on employment and wages, construction, real estate, consumer spending, and tourism. In this role, he networks with businesses in the Bank’s six-state region and gives frequent speeches on economic conditions. Follow him on Twitter @RonWirtz.