Relatedly, are all large businesses also C corporations? Answering these questions may help to better target particular tax, and nontax, policies. This report uses 2015 U.S. Census data to investigate how the size of businesses varies by legal form (corporate and pass-through), as well as the distribution of employment across firm types. Firm size is measured by using employment. The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA). Thus, it appears that based on an employment-based measure of size most businesses were small, with the exact share depending on the definition chosen. Looking further into the data reveals that while the majority of firms were small, the largest firms accounted for the majority of employment. For example, about 53% of all employees worked at firms with 500 or more employees. In contrast, 25% of pass-through employees worked at firms with more than 500 employees. For example, 73% of corporations and 81% of pass-throughs had fewer than 10 employees; 85% of corporations and 91% of pass-throughs had fewer than 20 employees; 97% of corporations and 99% of pass-throughs had fewer than 100 employees; and 99% of corporations and 99.7% of pass-throughs had fewer than 500 employees—the most common employee-based threshold used by the SBA for small business determination. Roughly 76% of corporate employees worked at firms with more than 500 employees in 2015. Thus, nearly a quarter of pass-through workers were employed at the largest firms, while in the corporate sector the share was nearly 76%. Average Number of Employees at the Largest Firms

Observing the average number of employees at large firms (more than 500 employees) offers insight into how large the largest firms were in 2015. The average number of employees at the largest C corporations (500 or more employees) was slightly above 4,100, while the average number of employees for pass-throughs was just over 1,100. Among large pass-throughs, partnerships tended to have the most employees on average with 1,203, S-corporations fall in the middle with 1,102 employees on average, and sole proprietorships have the fewest with 1,086 employees on average. Understanding these data may help policymakers when considering tax policy. But the analysis presented here shows this is not the case.
In tax policy discussions it is not uncommon for the terms pass-through and small business to be interchanged, or, similarly, for the terms corporation and large business to be interchanged. This report uses 2015 U.S. Census data to investigate how the size of businesses varies by legal form (corporate versus pass-through). For this report, firm size is based on employment. The analysis finds that the majority of both corporations and pass-throughs in 2015 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA). Thus, when using an employment-based measure of size, the majority of all businesses can be considered small, with the exact share depending on the chosen definition of small.
Analysis of the data also reveals that while the majority of firms were small, the largest firms accounted for the majority of employment. About 53% of all employees worked at firms (corporate and pass-through) with 500 or more employees in 2015. Looking at this statistic separately for corporations and pass-throughs, 76% of corporate employees worked at firms with more than 500 employees, while 25% of pass-through employees worked at firms with more than 500 employees. Thus, while a greater proportion of workers in the corporate sector were employed by the largest firms, the proportion of pass-through employees employed at the largest firms was not small.
The average number of employees at large firms (more than 500 employees) was computed to gain insight into how large the largest firms were in 2015. There was a substantial difference in the average number of employees at large firms that were corporations as opposed to pass-throughs. The average number of employees at the largest C corporations (500 or more employees) was 4,143, while the average number of employees for pass-throughs was 1,141. Among large pass-throughs, partnerships tended to have the most employees on average with 1,203, S-corporations fall in the middle with 1,102 employees on average, and sole proprietorships have the fewest with 1,086 employees on average.
Understanding the data presented in this report may help policymakers when considering tax and nontax policies. Specifically, it may help to better target policies that are geared toward affecting businesses of a particular size.