How are small businesses defined?

Small businesses are a major force in the U.S. economy, with 28 million small businesses make up 99.7% of all U.S. firms. But what exactly is considered a small business?

Generally, a small business has fewer than 1,500 employees and a maximum of $38.5 million in average annual receipts. But according to the U.S. Small Business Administration (SBA), the real answer depends on industry, revenue, and number of employees.

The SBA has a comprehensive table of standards that determine whether a business qualifies as small. Some of the major industry small business definitions are in agriculture, which must have at most $750,000 in average receipts to be a small business. In the manufacturing industry, the maximum number of employees ranges from 500 to 1,500 with approximately 27% of all manufacturing businesses having a maximum employee cap at 500 employees.

While these figures may seem high, it’s important to keep in mind that small businesses with fewer than 20 employees make up 89.6% of all U.S. business enterprises. Furthermore, 23 million businesses in the United States have no employees at all and are run solely by the owner.

Why does the definition of a small business matter? Small businesses are vital to our economy and when a business is officially designated as a small business by the SBA, they may qualify for special programs, grants, or tax benefits.

Learn more about small businesses and how they are defined here!