New business applications in Henrico continue to jump

It’s safe to say business is booming in Henrico.

New data from the United States Census Bureau shows that the county saw an increase in business applications of more than 22% in 2021, following a jump of 35% in 2020.

The Census Bureau defines a business application as an Employer Identification Number application for business purposes. An EIN never expires and is also known as a Federal Tax Identification Number, which is a unique code the IRS assigns to businesses or entities for tax purposes.

In total there were 5,617 new business applications in 2020 and 6,860 in 2021 in Henrico County, according to data from the U.S. Census Bureau.

A business without an EIN still can file with the county finance department and receive a business license, so there may be an imperfect correlation between the number of EIN filings and new businesses, according to Henrico Revenue Division Director Leo Marsh. But businesses need an EIN to be legally recognized on the federal level, so a rise in business applications offers a reasonable estimate of the number of new businesses formed.

Marsh acknowledged the lessening of COVID-19 restrictions as a reason for the rise in business applications in the past two years.

“Now that the county's open to in person traffic and we have some online filing options as well, people are better able to get in touch with us now. Almost like it was pre pre-pandemic,” Marsh said. “As businesses are navigating what to do with the current state of the pandemic there's probably more that are just getting on with life and doing what they need to do to either start or stay open.”

A significant increase in business applications also could indicate that the economy is doing either exceptionally well or exceptionally poorly, according to Marsh. For example, if the economy is good, businesses are more likely to expand, but if it’s bad, then people who are left unemployed may be inclined to start their own businesses.

In this case, the rise in business applications is a result of the economy bouncing back from the COVID-19 pandemic, Marsh said.

When compared to surrounding counties like Hanover and Chesterfield County, Henrico had the largest jump in business applications – both by total number and percentage – in 2020 and 2021. Chesterfield's totals rose 30% (to 5,369) in 2020 and another 20% (to 6,489) last year, while Hanover's totals fell by 9% in 2020 (to 1,099) and rose 18% (to 1,296) last year, according to the federal data. The city of Richmond has witnessed 34% and 33% jumps, respectively, with 4,460 new applications in 2020 and 5,937 last year.

Access to transportation, consumer population, and tax advantages are the main factors that draw businesses to Henrico over other areas, Marsh said.

“With Henrico, there is overall a low tax burden that benefits both businesses and their customer base,” Marsh said. “We also have the airport and a really good road system in this area with good traffic flow. Also, having a good education system attracts people here and attracts businesses.”