What is Small Business?

In addition to how a business is organized legally, size is also a way to classifying businesses. A small business is generally defined as any independently owned business with fewer than 500 employees that is not dominant in its industry. The Small Business Administration (SBA) is responsible for issuing the specific criteria that render a business a small business. These criteria vary widely by industry. As recently as 2010, in an effort to make more businesses eligible for SBA loan assistance programs and to encourage economic growth and job creation, the SBA issued sweeping changes to the rules governing small businesses.

For example, a car dealership is defined as a small business if it has 200 or fewer employees, whereas many manufacturing operations and other businesses can have up to 500 employees and still be considered small. Most experts use 500 or fewer employees as a general rule for defining small businesses. The definition of a small business is not limited to the number of employees, however. The designation as a small business may be imposed based on overall annual sales. For example, hotels, which operate within the service industry, can earn $30 million annually and still be considered small businesses.

Other services, such as industrial launderers, can earn $35. 5 million and still be considered small businesses. For example, a car dealership is defined as a small business if it has 200 or fewer employees, whereas many manufacturing operations and other businesses can have up to 500 employees and still be considered small. Most experts use 500 or fewer employees as a general rule for defining small businesses. The definition of a small business is not limited to the number of employees, however. The designation as a small business may be imposed based on overall annual sales.

For example, hotels, which operate within the service industry, can earn $30 million annually and still be considered small businesses. Other services, such as industrial launderers, can earn $35. 5 million and still be considered small businesses. Why Is Small Business Important in the U. S. Economy? According to the SBA, small businesses are of critical importance to the U. S. economy in a number of ways, including the following:

•Small businesses make up nearly 99. 7 percent of all employers in the United States.

•Outside of farming, small businesses create more than 50 percent of the U. S. gross domestic product and employ more than 50 percent of U. S. private sector workers. •Small businesses tend to be highly innovative, thus accounting for nearly 14 times more patents than large corporations that produce patents. In other words, some of the greatest innovations have been started by small businesses. Consider that modern advances, such as the automatic transmission, FM radios, insulin, and penicillin all began with small businesses.

•Small businesses tend to be spread out throughout the United States, bringing employment, products, and services to nearly every community in the country. In other words, small businesses are not confined to large cities but also serve small towns and rural communities. •Small businesses account for nearly 97 percent of U. S. exports and provide 31 percent of the value of those exports. •Small businesses are often owned and operated by women and minorities, which has opened the door for many minority groups to participate and invest in the U. S. economy.

Minorities and women own more than 4 million and nearly 6. 5 million small businesses, respectively. •Small businesses create more than 65 percent of all new jobs in the United States. Despite these tremendous advantages, there are also disadvantages to small business. These businesses, especially new ones, face the risk of failure due to capital limitations. In many cases, small businesses have limited scope and do not necessarily grow into large corporations. Similarly, their owners may achieve limited personal success and wealth and often do not have access to an endless source of capital.

Like larger businesses, small businesses can be organized in a variety of ways. In choosing a business form, it is important to weigh the advantages and disadvantages of the available forms. Limited Partnerships The limited partnership alters the structure of the general partnership by introducing a new class of partner, the limited partner. General partners manage and operate the limited partnership and are subject to unlimited personal liability for partnership obligations.

Limited partners enjoy limited liability for partnership obligations but have no right to exert meaningful control over day-to-day operations of the business. Formation of a limited partnership requires the filing of a Certificate of Limited Partnership. While a limited partnership may be formed without a written limited partnership agreement,absence of a written agreement may support the inference that the partnership is, in fact, a general partnership. Thus, imposing unlimited liability upon all partners. Limited Liability Partnerships

In a general partnership, each partner incurs unlimited liability for partnership obligations. In multi-state with thousands of partners, there is a significant chance that partners might face financial ruin due to the conduct of a single partner with whom they have never worked and never met. The Limited Liability Partnership, or LLP, sometimes known as a Registered Limited Liability Partnership, or RLLP, was designed to rectify this problem. Although Limited Liability Partnerships are managed like general partnerships, there are different rules governing the liability of partners.

Generally, limited liability partners incur unlimited liability for partnership contracts and debts and limited liability for torts committed by another partner. Most states recognizing the LLP require the partnership to maintain a specified amount of liability insurance to compensate victims of torts committed by a partner. Formation of an LLP requires the filing of an application or registration. While a written limited liability partnership agreement is not required by law, it is strongly suggested. Limited Liability Companies

The Limited Liability Company, or LLC, is perhaps the most advantageous form for most small businesses and for many larger businesses as well. The LLC combines the limited liability of a corporation with the flexible and informal management of a partnership. Federal law allows LLCs the option of taxation as a partnership or as a corporation. Depending upon state law, an LLC may exist in perpetuity, as do most corporations. A document, typically referred to as Articles of Organization, is filed to create a Limited Liability Company.

A written operating agreement may be required depending on state law; where a written operating agreement is not required, statutes will generally establish the rights of members and the method by which the LLC is to be operated and managed. The SBA offers various incentives and programs to help these small businesses thrive, including the following: •Financial assistance in the form of grants and low-interest loans help small ventures stay in business and expand—in fact, the SBA helps coordinate lenders and borrowers in an effort to facilitate the financing needs of small businesses.

•The SBA disseminates information about national and international contract opportunities within and outside of the government and encourages small businesses to apply for these contracts. •Assistance is offered to those starting, planning, and growing small businesses, as are general legal information and compliance reports to owners, including specific counsel to small businesses owned by women and accounting and taxation training to help various types of small businesses succeed.

•Small businesses and entrepreneurial ventures are vital to every industry sector in the U.S. and global economy. Small businesses tend to be more responsive to changing conditions than larger, less-flexible, organizations. They also create the most new jobs and products in today’s economy. More than 65 percent of all new jobs in the U. S. are created by small businesses. Developing and exploiting a sustainable competitive advantage is an important task for small businesses and entrepreneurial ventures, just like larger organizations. •Nearly 40 percent of all small businesses exist within the service industry, accounting for more than 2 million firms.

Medical practices, accounting firms, engineering and legal offices, nursing and rehabilitation facilities, and other practices are most largely representative of small businesses in the United States. The second largest small business representation is retail which includes grocery stores, pharmacies, bookstores, jewelers, clothing stores, and more. of ways by facilitating lending, offering training, and so on. The SBA is responsible for classifying businesses by their size and their income. Small BusinessA business that is independently owned and operated for profit and is not dominant in its industry.

Small businesses and entrepreneurial ventures are vital to every industry sector in the U. S. and global economy. Small businesses tend to be more responsive to changing conditions than larger, less-flexible, organizations. They also create the most new jobs and products in today’s economy. More than 65 percent of all new jobs in the U. S. are created by small businesses. Developing and exploiting a sustainable competitive advantage is an important task for small businesses and entrepreneurial ventures, just like larger organizations.

Nearly 40 percent of all small businesses exist within the service industry, accounting for more than 2 million firms. Medical practices, accounting firms, engineering and legal offices, nursing and rehabilitation facilities, and other practices are most largely representative of small businesses in the United States. The second largest small business representation is retail which includes grocery stores, pharmacies, bookstores, jewelers, clothing stores, and more. Small businesses and entrepreneurial ventures are vital to every industry sector in the U. S. and global economy. Small businesses tend to be more responsive to changing conditions than larger, less-flexible, organizations.

They also create the most new jobs and products in today’s economy. More than 65 percent of all new jobs in the U. S. are created by small businesses. Developing and exploiting a sustainable competitive advantage is an important task for small businesses and entrepreneurial ventures, just like larger organizations. Nearly 40 percent of all small businesses exist within the service industry, accounting for more than 2 million firms. Medical practices, accounting firms, engineering and legal offices, nursing and rehabilitation facilities, and other practices are most largely representative of small businesses in the United States.

The second largest small business representation is retail which includes grocery stores, pharmacies, bookstores, jewelers, clothing stores, and more. Small Business Administration (SBA)Helps small businesses in the United States in a variety of ways by facilitating lending, offering training, and so on. The SBA is responsible for classifying businesses by their size and their income. Small BusinessA business that is independently owned and operated for profit and is not dominant in its industry.