The Own Boss Gap

Every Labor Day the same rankings arrive, the hardest working states, the best states to work in, the states where people leave the most vacation unused. All of them measure employees, because that is who the surveys count. They cannot see the 16,599,836 Americans who employ themselves, 9.9 percent of everyone who works, one worker in ten.

This page puts those workers back, state by state, from two 2024 census tables. It counts them, and it compares what they earn with what employees earn in the same state. The phrase self employed turns out to be hiding two groups with almost nothing in common.

1. One worker in ten is their own boss. 16.6 million people, 9.9 percent of the 166.9 million who work. The share runs from one in seven in Montana, 14.9 percent, to one in fifteen in West Virginia, 6.7 percent.
2. The self employed West. Seven of the ten states with the largest share are in the West or on the northern Plains, and the other three are Vermont, Maine and Florida. The five with the smallest share are West Virginia, Indiana, Ohio, Wisconsin and Kentucky.
3. Self employed people who have incorporated earn more than employees in all fifty states. The premium runs from 4 percent in Wisconsin to 60 percent in North Dakota, where the incorporated median is $77,700 against $48,588 for an employee.
4. Self employed people who have not incorporated earn less than employees in all fifty states. The penalty is 39 percent in New Jersey, $35,736 against $58,364, and 35 percent or worse in California, Colorado, New York, Alaska, New Jersey, Illinois and Virginia.
5. Six in ten self employed Americans are on the lower side of that line. 9.85 million of the 16.6 million have not incorporated, from 68 percent in Rhode Island and Tennessee to 50 percent in Utah.
6. The Dakotas are the only place where working for yourself without a company pays like a job. South Dakota's unincorporated median is $44,430 against $44,757 for employees, a difference inside the survey's margin of error. North Dakota is 4 percent behind. Everywhere else the gap is at least 9 percent, and in 36 states it is 25 percent or more.
7. The paperwork that separates the two groups costs between $35 and $1,000. The first year cost of forming an LLC is $35 in Montana and $1,000 in Massachusetts. In Alaska the gap between the two self employed medians is $39,279 and the first year cost to incorporate is $400. This is a description, not a promise, see the section on what the comparison cannot say.

Ranked by the share of all workers who are self employed. Pay is the 2024 median for the civilian employed population aged 16 and over, in 2024 dollars. Employee means an employee of a private company. The two percentage columns compare each self employed median with the same state's employee median.

National totals, 166,903,650 workers, 16,599,836 self employed, of whom 6,745,057 have incorporated and 9,854,779 have not. The District of Columbia is excluded because it is not a state.

The word self employed covers a dentist with a practice and a corporation, and a person driving deliveries on a 1099. The survey separates them, and the split is the story.

Incorporated. 6.7 million people. Median earnings above the employee median in every state, at a median of $59,427 against $46,903 across the fifty states. This group is more male, 43 percent of self employed men have incorporated against 37 percent of self employed women.

Not incorporated. 9.9 million people. Median earnings below the employee median in every state, at a median of $34,905 across the fifty states. In Kentucky and Mississippi the median unincorporated self employed worker earns under $30,000 a year.

Where the line is widest. Alaska, $71,459 incorporated against $32,180 not. California, $68,150 against $32,888. New Hampshire, $71,730 against $40,034. North Dakota, $77,700 against $46,779. Michigan, $60,252 against $30,187.

Where it is narrowest. Iowa, $51,413 against $36,605. Wyoming, $50,765 against $35,274. Hawaii, $52,983 against $36,989. South Dakota, $60,568 against $44,430. Wisconsin, $52,315 against $35,968.

Who is counted. US Census Bureau, American Community Survey 2024 one year estimates, table B24080, Sex by Class of Worker for the Civilian Employed Population 16 Years and Over. Self employed is the sum of four cells, men and women in own incorporated business, and men and women in own not incorporated business. The share divides that sum by the total employed population in the same table.

What they earn. ACS 2024 one year estimates, table B24081, Class of Worker by Median Earnings in the Past 12 Months, in 2024 inflation adjusted dollars. Employee is the cell for employee of private company workers. The two self employed cells are self employed in own incorporated business, and self employed in own not incorporated business and unpaid family workers.

The percentages. Each self employed median divided by the same state's employee median, minus one. A positive figure means that group earns more than employees in that state.

The cost to incorporate. StartupOwl's fifty state fee table, the LLC filing fee plus any first year fee, flat franchise tax and first annual report fee, verified at each state's filing office.

Margins of error. Medians for small states carry wide margins. The incorporated median has a margin above 15 percent in Alaska, Delaware, West Virginia, Montana, Hawaii, New Hampshire and Vermont. The unincorporated median has a margin above 15 percent in Vermont, Wyoming, Delaware and South Dakota. At the published medians, the incorporated group is above employees in all fifty states and the unincorporated group is below in all fifty. Taking each margin at its edge, the incorporated premium is statistically distinguishable from zero in 45 states and not in Delaware, Hawaii, Vermont, West Virginia and Wisconsin, and the unincorporated penalty is distinguishable in 48 states and not in North Dakota and South Dakota, which is why South Dakota is reported as a tie. Rankings that depend on small differences between small states are approximate.

The survey reports what people earn, not why. People with larger, older or more profitable businesses are more likely to have incorporated, so the incorporated premium reflects who incorporates as much as what incorporating does. Nobody should read this table as evidence that filing paperwork raises income. It shows which side of the line each state's self employed sit on, and what the line costs to cross.