Businesses can legally organize themselves in different ways. C corporations have more flexibility in their activities, but they are required to pay corporate income tax. S corporations and partnerships are pass-through entities that are not taxed at the entity level and transfer profits and liabilities directly to the owners of the businesses. Sole proprietorships are businesses owned and operated by just one person.
Given the complexity associated with each businesses type, large businesses normally organize themselves as C corporations, small-and-medium enterprises tend to organize themselves as pass-through entities. In contrast, sole proprietorships tend to be the smallest businesses of all. These tendencies become evident in the 2019 Hawaii Business Income Statistics Report.
Big business does most of the business in the State:
Even though C corporations represent the smallest number of businesses, they collect the largest portion of the State’s receipts. Most C corporations are much larger in size than other types of businesses. On the other hand, sole proprietorships make up most of the business entities in the State, yet they collect a small portion of the business receipts. This reflects the small size of most sole proprietorships.
Figure 1 from the 2019 report shows that C Corporations made up only 7.9% of all business entities, yet they contributed 58.9% of total business receipts. S corporations and partnerships made up 14.1% of all business entities and 32.2% of all business receipts respectively. Sole proprietorships had 158,265 business entities, representing 77.9% of total business entities, while accounted for only 6.6% of the total business receipts.
The Business Income Report provides insights into the structure of Hawaii’s economy like the relative contribution of business types. Check out the report to take a deeper look into the State’s business activities.
Note: Sole proprietorships were excluded for calculating all entities for wages paid, net profit, and net loss due to data not available.