Original data analysis · Published October 16, 2026
Being open does not mean being profitable. 9.7 million nonfarm sole-proprietorship returns reported no positive net income in 2023, according to our analysis of IRS tables. That is 31.2% of the total.
The gap varies sharply by activity. About one in five specialty-trade returns had no positive income. Among restaurants and drinking places, the share was more than two in five. These figures describe tax results for a year; they do not count business closures.
Which sectors most often reported no positive income?
The table separates broad sectors rather than adding their subcategories together. Retail had the largest share among the broad sectors in this source. Construction had a lower share, although the absolute number of returns without positive income was still substantial.
| Broad IRS sector | All returns | No positive net income | Share |
|---|---|---|---|
| Retail trade | 2,276,668 | 1,094,545 | 48.1% |
| Manufacturing | 417,440 | 184,325 | 44.2% |
| Accommodation, food services, and drinking places | 738,481 | 322,911 | 43.7% |
| Agriculture, forestry, hunting, and fishing | 356,476 | 155,573 | 43.6% |
| Wholesale trade (merchant wholesalers) | 457,822 | 192,221 | 42.0% |
| Real estate and rental and leasing | 1,511,411 | 623,900 | 41.3% |
| Information | 474,628 | 174,529 | 36.8% |
| Arts, entertainment, and recreation | 1,784,320 | 629,324 | 35.3% |
| Finance and insurance | 708,558 | 224,267 | 31.7% |
| Professional, scientific, and technical services | 3,912,417 | 1,203,320 | 30.8% |
| Other services | 4,066,467 | 1,214,707 | 29.9% |
| Transportation and warehousing | 3,922,574 | 1,164,131 | 29.7% |
| Utilities | 31,174 | 8,989 | 28.8% |
| Mining | 86,848 | 24,965 | 28.7% |
| Administrative and support and waste management and remediation services | 3,159,026 | 861,938 | 27.3% |
| Unclassified establishments | 521,885 | 138,318 | 26.5% |
| Health care and social assistance | 2,468,353 | 607,751 | 24.6% |
| Educational services | 862,502 | 206,338 | 23.9% |
| Construction | 3,368,860 | 682,394 | 20.3% |
A closer look at everyday businesses
These selected activities help a prospective owner compare recognizable types of work. The real-estate row combines agents, brokers, property managers and appraisers. Administrative and support services includes more than cleaning. The IRS categories cannot support separate rates for each of those individual occupations.
| Selected IRS activity | All returns | No positive income | Share |
|---|---|---|---|
| Specialty trade contractors | 2,521,516 | 518,817 | 20.6% |
| Offices of real estate agents, brokers, property managers, and appraisers | 1,046,471 | 387,724 | 37.1% |
| Legal services | 316,370 | 71,542 | 22.6% |
| Other accounting services | 333,080 | 79,512 | 23.9% |
| Computer systems design services | 318,183 | 94,120 | 29.6% |
| Management, scientific, and technical consulting services | 1,109,907 | 366,760 | 33.0% |
| Administrative and support services | 3,118,914 | 848,172 | 27.2% |
| Home health care services | 478,730 | 168,999 | 35.3% |
| Social assistance | 803,710 | 141,493 | 17.6% |
| Restaurants (full & limited service) and drinking places | 653,372 | 276,837 | 42.4% |
| Auto repair and maintenance | 465,852 | 163,426 | 35.1% |
| Personal and laundry services | 2,957,905 | 852,320 | 28.8% |
A business can pay bills and still report a tax loss
Receipts, cash in the bank and taxable net income measure different things. Deductions such as depreciation can affect tax profit differently from cash spending in the same year. Owner withdrawals also are not a wage expense on Schedule C. The data cannot tell us whether an owner lived comfortably, used savings or worked another job.
A return with positive net income can still produce too little to support its owner. Conversely, one year without positive tax income is not proof that a business closed or will fail. This study supplies a profitability-incidence measure, not the odds that a new venture succeeds.
Budget for the business you are actually starting
Write down the price you expect to collect, direct costs of fulfilling the job, fixed monthly bills and the time spent finding customers. Keep those assumptions separate from your personal living costs. Revisit them after the first real invoices: sales volume alone cannot tell you what remains.
The IRS universe also includes eligible single-member LLCs taxed as disregarded entities. It is not a comparison of LLCs with unincorporated businesses, and these numbers cannot establish that one legal structure produces better margins.
Source, calculation and limits
Checked October 16, 2026. We used the IRS nonfarm sole proprietorship statistics, Table 1 for tax year 2023. All figures are sample-based estimates. No-positive-income returns = all returns − returns with positive net income. National calculation: 31,125,909 − 21,411,462 = 9,714,447; divided by 31,125,909 = 31.21%.
The national denominator is the published total, not the sum of rounded sector estimates. Broad sectors and selected detailed activities are shown separately to avoid double-counting. Zero and deficit returns remain combined. The table covers nonfarm Schedule C reporting, not all U.S. companies, partnerships or corporations; it does not isolate full-time owners, new firms, employer status or business age. Figures are from 2023, not a reading of 2026 trading conditions.
Cite this study
StartBusinessByState.com. “Open for Business. No Profit to Show.” Published October 16, 2026. https://startbusinessbystate.com/businesses-reporting-no-profit/.
Our original analysis and graphic are available under CC BY 4.0. Credit this study and link to this page when reusing them. Underlying source materials retain their own terms and remain available from the original agencies. This permission applies to our original analysis and graphic, not to the source publications.
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