Are You Certain You Own a “Small” Business?

It might make sense to strike “small” as a descriptor for any business.  National Public Radio (NPR) has been running a series on small business which has left me thoroughly confused as to what the definition of small business is.  In her NPR segment “Small Businesses: Big Concerns and High Hopes” (9/24/13), Marilyn Geewax states,

“In reality, small firms overwhelmingly are made up of individuals working alone — they are freelance writers, lawn mowers, consultants and housecleaners. U.S. Census Bureau says 3 out of 4 firms have no payroll, and collectively, they account for only 3.4 percent of all business receipts.  But while most of the nation’s roughly 28 million firms have no workers, about 6 million do hire, fire and pay people. Of those, roughly 5 million really are small, with nine or fewer workers.  That leaves those approximately 1 million firms that hire at least 10 people, but not more than the 500 — keeping them within the Small Business Administration’s usual definition of ‘small’.”

However, according to the Small Business Administration (SBA), a small business is one that is independently owned and operated, is managed for profit and does not dominate over the competition.  The SBA also says that the maximum number of employees in a “small” business can vary from 500 – 1500 depending on the industry.  The SBA’s definitions of “small” are important because they help determine which businesses are eligible to get special loans or loan guarantees. It can also determine who can bid on government contracts that are set aside for small business. The SBA’s work also helps inform other parts of the government that have programs aimed at small firms.

Take, for example, the new health care law. Employers with 50 or more full-time workers have to either provide health insurance or pay a penalty. Even 50 is not a standard measure across the federal government.

So if the government cannot agree on the definition, then why should I get hung up on it?  Good question.


The HR Experts for Small Business

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