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More Naturalized Citizens are Starting Small Businesses

Max Freedman
Max Freedman
Business News Daily Contributing Writer
Updated Apr 20, 2022

Naturalized citizens are twice as likely as other citizens to start businesses. How can business owners navigate the complex territory of immigration law?

  • Naturalized citizens are twice as likely as other citizens to start their own businesses.
  • If you hire immigrants, you should obtain their I-9 forms and learn how to respond in the rare event of an ICE raid. 
  • If you’re an immigrant, starting your own business may be your easiest option for finding work.
  • This article is for naturalized citizens considering starting a business and business owners who have hired – or want to hire – immigrants.

Immigration in America has been a hot-button issue for decades. While most proponents of stricter immigration policies believe restrictions will save American jobs, a 2019 survey by FundRocket found that immigrants who become naturalized citizens are significant drivers of the country’s small business community.

According to the study, which drew on data from the U.S. Census Bureau’s American Community Survey, naturalized citizens are twice as likely to start incorporated businesses as U.S.-born citizens. What’s more, the industries and cities in which they operate are thriving.

We’ll explore more about naturalized citizen business ownership and look at considerations for employers hiring immigrants.

Did you know?Did you know?: Whether you’re a naturalized citizen or a U.S.-born citizen starting a business, it’s crucial to choose the best legal structure for your business, such as a sole proprietorship, partnership, limited liability company (LLC) or corporation.

2019 naturalized citizen business ownership statistics

Below is a summary of what the 2019 FundRocket survey discovered about naturalized citizen business ownership.

Business ownership and employment

In 2022, there are nearly 32 million small businesses in the U.S., accounting for 61 million jobs, or around 47.1% of the American workforce, according to the U.S. Small Business Administration. These numbers were only slightly smaller in 2019 when FundRocket revealed its results. At that time, the 12.5% of incorporated businesses owned by naturalized citizens accounted for roughly 7.5 million jobs.

Here are some highlights of what the researchers found: 

  • The number of immigrant-owned businesses skyrocketed. Though the number of businesses owned by naturalized citizens made up a small percentage of the overall workforce – compared to the 80% owned by U.S.-born citizens – researchers found that the number of incorporated businesses owned by immigrants skyrocketed by 70.5% between 2000 and 2017.
  • Naturalized citizens were more likely to work for themselves. Researchers also found that naturalized citizens were likely to succeed at self-employment. They were twice as likely to work for their own businesses than people born in the U.S. According to the data, 3.8% of naturalized citizens worked for themselves, compared with 1.9% of American-born residents. The trend continued in unincorporated businesses, as 5.3% of immigrants worked for themselves in that area, compared with 3.4% of American-born residents.
  • A higher percentage of naturalized citizens held salaried positions. Overall, 53.6% of naturalized citizens held wage-based or salaried positions, compared with 42.7% of U.S.-born citizens.
  • Naturalized citizens experienced unemployment at a lower rate. The data also showed that 43.3% of U.S.-born workers reported being unemployed, while 28.2% of naturalized citizens polled said they were out of work.

While those unemployment numbers differed from those reported by the U.S. Bureau of Labor Statistics, which shows U.S.-born and non-U.S.-born workers experiencing a much smaller gap in their respective unemployment rates, researchers said that the discrepancy likely relates to the “rates of attrition” in the workforce.

“In some cases, naturalized citizens who came to America later in life are not eligible for benefits such as Social Security, meaning they can’t comfortably retire like their [U.S.-born] peers,” they wrote.

TipTip: Looking for a job? Don’t tell them you’re unemployed. Research shows that some hiring managers react unfavorably to unemployed candidates.

Immigrant industrial growth

Here are some findings related to immigrants and industrial growth: 

  • Some industries benefited more from immigrant participation. Researchers found that construction (10%), food services (7.4%) and real estate (5.2%) had the highest percentages of naturalized business owners.
  • Naturalized citizen business ownership spurred industry growth. From 2000 to 2017, some industries experienced exponential growth thanks to the influx of naturalized citizen business ownership. During that span, child daycare grew more than 17 times larger, despite an ongoing shortage of childcare programs in the U.S. Other sectors that grew substantially during that time were crop production (by 15.5 times) and individual and family services (by 6.9 times).
  • Other industries experienced growth. In comparison, U.S.-born business owners helped other industries boom during that time. The number of museums, art galleries, historical sites and other institutions grew 15.8 times larger. Beverage manufacturing (11.9 times) and electronic component and product manufacturing (8.1 times) also saw significant increases.
  • Some ethnicities saw a higher percentage of business owners. Researchers also found that specific ancestries comprised more significant percentages of small business owners. Asian Indians made up the largest group, owning 8.7% of small businesses owned by naturalized citizens, while Mexican (6.9%) and Chinese (6.4%) people were next on the list.
  • Other groups had notable ownership percentages. Further data showed that 25% of naturalized citizens hailing from Kuwait were business owners, with most of their holdings in real estate. Similarly, 23.6% of naturalized Polynesian Americans owned businesses, primarily in professional, scientific and technical services. Nearly 20% of naturalized Israeli Americans were small business owners, with most of their businesses being in the construction industry.

Business-friendly locations available to naturalized citizens

Findings related to naturalized citizen-owned business locations included the following: 

  • Naturalized citizen-owned businesses thrived in sanctuary cities. Researchers found that many “sanctuary cities” were metropolitan areas with large percentages of businesses owned by naturalized citizens. The biggest concentration, according to the study, was in El Centro, California, with 50.4% of incorporated businesses owned by immigrants. Mexican Americans made up the majority there.
  • Some locations had large percentages of immigrant-owned businesses. Of the top 15 metropolitan areas researched, eight were located in California, and only three were located in a non-coastal state (Texas). Other locales with a large percentage of businesses owned by naturalized citizens included Los Angeles; Washington, D.C.; and Newark, New Jersey. 
  • Florida and California were notable locations. Researchers also revealed that 1 in 5 business owners in Florida were naturalized citizens, while California businesses accounted for the largest percentage of incorporated businesses owned by naturalized citizens – 23.8%.

Did you know?Did you know?: The founders of some household-name brands – including Tesla, eBay, Yahoo and Google – are immigrants. Learn more about how to become an entrepreneur as an immigrant.

The role of immigrants in the American workforce

Immigrants play a crucial role in the American economy beyond business ownership. According to 2021 data from the George W. Bush Presidential Center, immigrants make up 17% of the U.S. workforce. This data also shows that 45% of Fortune 500 owners in 2019 were first-generation immigrants. Additionally, immigrants are awarded twice as many patents as non-immigrants.

Further data by sector shows that immigrants make up a significant percentage of several industries:

  • 30% of physicians
  • 19% of truck drivers
  • 18% of food delivery drivers
  • 17% of grocery store employees
  • 15% of nurses

The Bush Center data highlights the food industry as especially reliant on immigrant workers. It also notes that roughly 70% of immigrant food workers are undocumented. The term “undocumented” describes immigrants who have yet to obtain the full legal paperwork required of U.S. residents. 

The Bush Center advocates for granting citizenship to immigrants, given the economic benefits of this large, diverse group. Successfully opening a straightforward pathway to citizenship could result in tens of billions of dollars worth of new economic activity.

Regulatory considerations for hiring immigrants

  • The federal government requires I-9 forms. You must collect Form I-9 from all immigrant and non-immigrant employees. This federal form verifies that an employee can legally work in the U.S.
  • Hiring undocumented people is technically illegal, but it happens anyway. Perhaps you’ve heard stories of ICE workplace raids that have resulted in mass arrests of undocumented people. These stories prove that employers often do hire undocumented people and pay them under the table. Doing so can come with risk, as the government can fine your company for hiring people who technically can’t work in the U.S.
  • ICE can’t raid your workplace without a warrant. The prospect of an ICE raid may seem scary, but it might not always be something to worry about. For starters, ICE needs a warrant to raid your workplace. This warrant is invalid if it lacks specific information or signatures. No warrant will require you to direct ICE agents to any of your employees, though you may need to grant ICE access to certain spaces. Additionally, the Biden administration has halted workplace raids, though a future president could restart them.
  • You can help sponsor immigrants. You can potentially sponsor immigrant employees through an H-1B visa. This visa generally applies for specialty occupations and highly technical work.
  • Undocumented people often start businesses. Since undocumented people technically can’t be employees, they often start their own companies. Many immigrants, undocumented people and naturalized citizens have successfully navigated the U.S. economy – and so will many others.

Andrew Martins contributed to the writing and reporting in this article.

Image Credit:

Ambrophoto/Shutterstock

Max Freedman
Max Freedman
Business News Daily Contributing Writer
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.