How are Small Businesses Defined?

Small businesses remain a cornerstone of the U.S. economy, comprising a staggering 99.9% of all American firms, totaling around 33 million enterprises. But what exactly qualifies as a small business today?

In general, a small business typically has fewer than 500 employees, 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 98% of all U.S. small business enterprises. Furthermore, over 27 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!