Founder Data ReportTen Years Ago, Three in Four Solo Businesses Made Money. Now It’s Just Over Two in Three.
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The IRS has published the same Schedule C table every year for a decade, and the line runs one way. The share of American sole proprietorships reporting a profit has fallen 5.9 points since 2013 — and the obvious explanation, that the gig economy flooded the count with tiny businesses, is not what the arithmetic says happened.
In tax year 2013, 74.7% of the 24,074,684 nonfarm sole proprietorships in the IRS Statistics of Income tables reported a profit. In tax year 2023, 68.8% of 31,125,909 did — a fall of 5.9 percentage points and the lowest share in the eleven years compared here. It is not a composition effect. A standard shift-share puts industry mix at +0.9 points, meaning the change in what industries solo businesses are in should have pushed the profitable share up; the within-industry term is -6.2 points, and 15 of the 18 named industries saw their own profitable share fall. In 2023 dollars, average net income per return dropped 26.2% over the decade, from $16,422 to $12,119 — but among the returns that actually made money the average fell only 4.7%, from $26,012 to $24,790. What changed is how many make money, and how much the rest lose.
- 74.7% of sole proprietorships reported a profit in tax year 2013. 68.8% did in 2023.
- The count grew by 7,051,225 returns over the decade. 3,611,820 of that — 51.2% — was businesses reporting no profit.
- Shift-share: industry mix +0.9 points, inside industries -6.2 points, interaction -0.6 points. The mix term points the wrong way for the gig-economy explanation.
- Average net income per return fell from $16,422 to $12,119 in 2023 dollars. Among returns that made money it fell only 4.7%.
- The average loss on a loss-making return rose 33.8% in real terms, from $11,820 to $15,810.
Eleven years, one direction
There is no clever measure here. It is column 9 of the same IRS table, divided by column 1, eleven times. The share of sole proprietorships reporting a profit was 74.7% in tax year 2013 and has not been that high since — it is below 73% in every year from 2018 on. It fell in eight of the ten year-on-year steps. The two years it rose were 2015 and 2021 — and 2021, the pandemic rebound, is the only one that moved it more than a point in the right direction. By 2023 it was 68.8%, the lowest on this run.
The vertical axis runs from 60% to 80%, not from zero, so that a 5.9-point move is visible; the gridlines are labelled so the scale is readable. Each point is that tax year’s returns with net income divided by all returns filed.
Source: IRS, Statistics of Income, Nonfarm Sole Proprietorship Returns, Table 1, tax years 2013-2023 (files 13sp01br.xls through 23sp01br.xls), retrieved from irs.gov on September 17, 2026. Dollar figures deflated to 2023 dollars with the BLS CPI-U annual average, U.S. city average, all items.
It is not the gig economy — and the mix term proves it
The easy explanation is that millions of drivers and couriers started filing Schedule C, and that a flood of tiny businesses dragged the average down. The first half of that is true: transportation and warehousing supplied 38.9% of the decade’s growth in returns, more than any other industry. The second half is not. Run the standard shift-share and industry mix comes out at +0.9 points — positive, because in 2013 the industries that went on to grow fastest were more likely than average to be profitable, not less. Strip the drivers and couriers out of the data entirely and everyone else still falls 5.77 points across the decade, against 5.86 points for the country as a whole. The decline is not something that arrived from outside. It happened inside 15 of the 18 named industries.
Bars are scaled against a 12-point axis and the exact change is printed beside each one. Colour is the sign of the change and nothing else — orange fell, slate rose. Industry names are the IRS sector headings, shortened; the residual ‘unclassified establishments’ row is excluded because it is not an industry.
Source: IRS, Statistics of Income, Nonfarm Sole Proprietorship Returns, Table 1, tax years 2013-2023 (files 13sp01br.xls through 23sp01br.xls), retrieved from irs.gov on September 17, 2026. Dollar figures deflated to 2023 dollars with the BLS CPI-U annual average, U.S. city average, all items.
In real terms the average fell more than five times harder than the businesses that were making money did. That gap is the finding.
The average fell much harder than the earners did
Average net income per return is the number most people quote, and in 2023 dollars it fell from $16,422 to $12,119 — down 26.2%. Read alone, that says solo businesses got a quarter poorer. They did not, or at least the ones that earn anything did not. Among the returns that reported a profit, average profit in 2023 dollars went from $26,012 to $24,790 — down 4.7%, roughly flat. The headline average moved because the mix behind it moved: more returns in the loss column, and bigger losses in it. The average loss on a loss-making return rose from $11,820 to $15,810, up 33.8% in real terms.
All six bars share one scale, topping out at $26,012, so the rows are comparable with each other and not only within themselves. Slate is the 2013 figure and orange the 2023 one throughout. The 2013 figures are deflated to 2023 dollars at the CPI-U annual average (x1.308). The third row is a loss, drawn as a magnitude.
Source: IRS, Statistics of Income, Nonfarm Sole Proprietorship Returns, Table 1, tax years 2013-2023 (files 13sp01br.xls through 23sp01br.xls), retrieved from irs.gov on September 17, 2026. Dollar figures deflated to 2023 dollars with the BLS CPI-U annual average, U.S. city average, all items.
Where the 5.9 points actually came from
A shift-share splits the move into three parts that add to it exactly: what the change in industry mix did at 2013 profitability, what the change in profitability did at 2013 mix, and the interaction between them. Mix is +0.9 points. Inside industries is -6.2 points — larger than the entire 5.9-point fall, because the mix term is working against it. Interaction is -0.6 points. If you run a business and your own industry’s line went down, this is the chart that says it was not just you, and it was not the drivers.
A standard three-term shift-share across the 19 IRS sector rows, which sum to the published national totals to within ten returns. The three terms reproduce the published change to better than a thousandth of a point.
Source: IRS, Statistics of Income, Nonfarm Sole Proprietorship Returns, Table 1, tax years 2013-2023 (files 13sp01br.xls through 23sp01br.xls), retrieved from irs.gov on September 17, 2026. Dollar figures deflated to 2023 dollars with the BLS CPI-U annual average, U.S. city average, all items.
One honest caveat, and it matters. A Schedule C is not the same thing as a business with a payroll: it is filed by anyone with self-employment income, from a full-time contractor to someone who drove two weekends. That is true in 2013 and in 2023 alike, so it does not explain a change over time — but it does mean these are not 31 million companies in the sense a banker would use the word. Reported net income is also after depreciation and the home-office and vehicle deductions, so a return can show a loss while the owner’s cash position is fine. Neither caveat moves in a direction that would create the trend on its own.
Frequently Asked Questions
What share of US sole proprietorships make a profit?
68.8% of the 31,125,909 nonfarm sole proprietorships in the IRS Statistics of Income tables for tax year 2023 reported net income. The other 9,714,447 reported none. Ten years earlier the profitable share was 74.7%.
Is the fall caused by gig workers filing Schedule C?
No. A shift-share across the 19 IRS sector rows puts industry mix at +0.9 points — the change in which industries solo businesses are in should have pushed the profitable share up, because the fastest-growing industries started the decade above average. Removing taxi, ridesharing, other ground transport and courier filers altogether still leaves everyone else falling 5.77 points across the decade, against 5.86 points nationally.
How much does the average sole proprietorship earn, adjusted for inflation?
$12,119 of net income less deficit per return in tax year 2023, against $16,422 in 2013 measured in the same 2023 dollars — a fall of 26.2%. Among only the returns that reported a profit, the average was $24,790 against $26,012, a fall of 4.7%.
How many industries got less profitable?
15 of the 18 named IRS industry sectors saw their share of returns reporting a profit fall between 2013 and 2023. The three that rose were utilities, finance and insurance, and arts, entertainment and recreation. The largest fall was transportation and warehousing at -11.7 points.
Are losses getting bigger, or just more common?
Both. The number of returns reporting no net income rose from 6,102,627 to 9,714,447, and the average loss on those returns rose from $11,820 to $15,810 in 2023 dollars, up 33.8%.
Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com
This article is for educational purposes and is not a substitute for professional financial or legal advice.