47% of Small Businesses Rely on Independent Contractors

Nearly one in two American small businesses — 47% — now use independent contractors to run and grow their operations, according to the SBE Council's October 2026 Small Business Check Up Survey. The figure anchors a broader shift: a record 74.9 million Americans engaged in independent work in 2026, per MBO Partners' September 2026 State of Independence report. That is the highest level on record, and the growth is not marginal.

Since 2020, the number of full-time independent professionals has risen 114% — more than doubling in six years. An estimated 5.8 million contractors now earn above $100,000 annually, nearly double the 2020 count. In short, independence has stopped being a fallback and become a business model.

Karen Kerrigan, President & CEO of the Small Business & Entrepreneurship Council, frames contractors as "a powerful force multiplier" for smaller firms. They supply expertise — technology, marketing, accounting, construction, consulting, logistics — that a small business may not need full-time. The arrangement cuts both ways: contractors build businesses around their expertise, choose clients and projects, and control how and when they work. Kerrigan calls it "business-to-business commerce in action," linking entrepreneur to entrepreneur.

What do the satisfaction numbers say?

The MBO Partners data challenges the assumption that independent work is a temporary stopgap. 78% of independent contractors plan to remain independent or build a larger business. More than three-quarters report high satisfaction with independent work.

Technology is widening the aperture. One-third of independent professionals now serve customers outside the United States. Nearly eight in ten say AI complements their work and improves productivity. For the small businesses hiring them, this talent pool offers a way to innovate and scale without building every function in-house.

The caveat: these figures come from advocacy-aligned research. Neither survey measures how many contractors would prefer traditional employment but cannot find it — a question the data does not address.

What is Washington doing about classification?

Federal policy is in motion. The U.S. Department of Labor is nearing completion of a new independent contractor rule under the Fair Labor Standards Act, intended to replace the Biden Administration's 2024 regulation.

In February 2026, DOL proposed restoring a streamlined economic-realities framework similar to the approach adopted during President Trump's first term, rescinding the Biden-era rule. The proposal emphasizes two central factors: the nature and degree of control over the work, and the worker's opportunity for profit or loss based on initiative or investment.

The SBE Council submitted comments supporting the changes, arguing they would provide "greater clarity and predictability" for entrepreneurs, contractors, and the small businesses that hire them. Clarity is genuinely incomplete: DOL stopped applying the 2024 rule's analysis in its own FLSA investigations in May 2025, but the regulation has not been formally rescinded and still matters in private litigation. DOL submitted its final rule for White House regulatory review on September 28, with publication targeted for October.

Kerrigan's position carries a balancing clause worth noting: "Genuine independent business relationships should not be discouraged or made unnecessarily difficult," she writes, while acknowledging that "protections against genuine employee misclassification remain important."

Where does policy push the other way?

State-level regulation is moving in the opposite direction. New Jersey's independent contractor regulations took effect October 1 and use a restrictive three-part ABC test to determine contractor status. Under ABC tests, a worker qualifies as a contractor only if the hiring party can satisfy every prong — typically including proof the work is outside the hirer's usual course of business. Kerrigan writes that even a quick look at the requirements shows "how incredibly difficult it will be for individuals to operate as independent contractors in the state."

The SBE Council's argument is straightforward: independent contracting is not a fringe arrangement but an established channel through which small businesses operate, individuals build income, and entrepreneurs create value. Whether the pending DOL rule settles the legal ambiguity — and whether states like New Jersey blunt it — will determine how much of the 74.9-million-person independent workforce can keep growing on its current trajectory.