Small business refers to any company or business that has fewer than fifty employees. Small businesses are generally privately owned corporations, sole proprietorships, or partnerships that have less than five employees and/or less yearly revenue than a normal-sized business. Many small businesses are considered as start up or smaller companies, since they do not have bank loans and other commercial loan requirements like large corporations. The term “small business” can apply to any business with fewer than fifty employees.
The term “little” business is a subjective term according to many people. One individual may view a start up business as very small, if it only has two employees, while another person may view the same business as too big if it has fifty employees. When the word “small” is used in the context of entrepreneurship, many people believe that it refers to those smaller businesses that focus on niches and/or sub-niches. This definition is most likely used because the word “small business” is more commonly associated with startups and newer companies, while the larger corporations are typically perceived as being more successful and stable. The result is that when people talk about a new business startup or small business, they are usually referring to the new companies that are coming from newer or smaller companies rather than the older, larger companies.
A definition of a small business can be broken down into the following elements: ownership structure, financial resources, employees, total number of employees, and geographic locations. In terms of ownership structure, people think that a sole proprietorship is the most common type of small business. In fact, there are over 7 million small businesses today! However, there are also sole proprietorship definition for just about every business type.
A sole proprietorship is a business structure where only one person owns the business. This is the definition that most people use when they speak about small businesses. But, it can also apply to partnerships, LLCs, and corporations. It just depends on the wording that is used. A sole proprietorship is not limited in what it can do. However, the owners will still share in the profits of the business structure and will also be the ones responsible for the debts of the company, if any.
The next element to a business-size definition is the number of employees. Usually, this element requires the existence of at least five employees. It can be more depending on the nature of the business. However, it should be noted that this doesn’t necessarily have to be the total number of employees when determining whether a business is a small business or not. For instance, many bakeries are one person but have a large amount of baking equipment.
The next thing to consider is whether the business is one that is run by one person or one that has several employees. This is especially important for the people who want to start their own businesses because it allows them to avoid paying taxes for corporate benefits as well as payroll taxes. Some people call this self employment. If you are unsure as to whether your business is one that is run by an individual or one that has several employees, you should ask the business inspector to help you out.
Lastly, the location of the business is also taken into consideration when applying the definition of small businesses to it. Most cities in the US require a minimum operating size in order for a business to receive city assistance. The inspectors usually look for businesses that have average annual receipts in excess of one million dollars. This is the highest that is considered small for an urban area.
So there are three main elements that define the definition of small businesses. The size of the enterprise, the number of employees, and the location of the business. All of these elements can be seen in the previous sections, where the definition was given. Now that you know what each of these factors are and how they are taken into account by the government, it should be easier for you to decide on the perfect definition of your business.