The Small Business Administration (SBA) defines a small business as a concern that is “organized for profit; has a place of business in the United States; makes a significant contribution to the U.S. economy through payment of taxes or use of American products; materials or labor; is independently owned and operated; is not dominant in its field, on a national basis; and is no larger than SBA’s small business size standard for its industry” (Cortese, 2011). As such, the definition of a small business can be somewhat loosely interpreted. The size cutoff for a small business is typically 500 employees. However, Headcount used when counting personnel can be misleading. A threshold by industry was used as an additional measure by the SBA to determine business qualifications. For example, agriculture can be less than $750,000 and construction can be less than $33.5 million. For nonmanufacturing industries, the standard is typically less than $7 million in average annual receipts (Cortese, 2011).

Due to the possible variances that could arise surrounding the specifics of a small business, small business owners often times find themselves as the pawn in policy debates (Cortese, 2011). An example of this includes the Bush tax cuts of 2010. In essence, it all boils down to the business structure. This can determine elements such as corporate taxes.


Cortese, A. (2011). Locavesting: The revolution in local investing and how to profit from it. Hoboken, NJ: J. Wiley & Sons.

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1 Comment

  1. The structure of small businesses is indeed extremely variable. For me, I’ve always thought of a small business as two or three employees (or self-employment) doing just enough business to get by with. I never really considered something like a construction company doing millions of dollars worth of business to be in this category. But the regulations tell a different story. I think a lot of my influence comes from that “small town” mentality that I was raised with. But going through all of this coursework has definitely opened my eyes to new possibilities. I suppose that everyone is local to somewhere, and “small” is definitely dependent upon what you are comparing it to. Wal-Mart was a local (and small) business at one point, but has since grown!


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