A small business is typically defined as a privately owned company, partnership, or sole proprietorship that has a small number of employees and relatively low volume of sales. The specific criteria for what constitutes a small business can vary by country and industry, but generally include factors such as:
Number of Employees: Small businesses usually have a limited number of employees, often fewer than 100, but this number can vary depending on the industry and the country. For example, in the United States, the Small Business Administration (SBA) defines a small business as one with fewer than 500 employees for most manufacturing and mining industries, and less than $7.5 million in average annual receipts for many non-manufacturing industries.
Revenue: Small businesses typically have lower revenue compared to large corporations. The specific revenue threshold that defines a small business can differ based on industry standards and government regulations.
Ownership and Management: Small businesses are often independently owned and operated, with a significant portion of decision-making and management handled by the owners themselves.
Market Area: Small businesses often serve local or regional markets rather than having a global presence.
Legal Structure: They can take various legal forms, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.
Small businesses play a vital role in the economy by contributing to job creation, fostering innovation, and providing personalized services and products. They are often seen as the backbone of local economies and are crucial for economic diversity and resilience.