Factors that influence business informality in the United States of America

This study examines the determinants of business registration among entrepreneurs and enterprises with paid employees in the USA. Business registration distinguishes between formal and informal economic activity. Informality suggests entrepreneurial and business activities are hidden from government purview not by legal restriction, but by choice. Little is known of the choice of business informality in the USA, representing a gap in the literature. Using a 2022 nationally representative survey of 10,028 White-owned and Latino-owned firms, approximately one-fifth of all surveyed businesses forgo business registration. Logistic regression results indicate that firm size, gender, and educational attainment significantly impact the likelihood of business registration. A primary interpretation of results suggests that larger enterprises find it difficult to hide from government detection while race and immigration do not significantly influence business registration. Public policy implications referencing targeted enforcement by firm size and consumer safety, research limitations, and future research directions are briefly introduced.