Financial vulnerability of small business owners

Abstract

This study examines the financial vulnerability of small business owners using data from the 2001 Survey of Consumer Finances. Financial vulnerability is determined by the extent to which income and wealth are derived from the same source. The findings suggest that business owners face unique financial vulnerability because of their reliance on the business as both a source of income and wealth. Business owners may have insufficient diversification when relying on the business as an asset to fund retirement. Among business owners, farmers are the most vulnerable; their proportions of total income and total portfolio attributable to the business are higher than other business types.