I n business, size matters. Your company’s size determines its eligibility for government contracts and the Small Business Administration’s (SBA) programs, including loans and other financial assistance.
Luckily, the standards that the SBA uses to define the maximum size of a company and its affiliates to qualify as a “small business” categorizes the majority of U.S. companies as “small.”
What is a Small Business “Size Standard”?
While the definition of “small” varies by industry, it’s typically determined by the number of employees over the past 12 months or the average annual receipts over the past three years. In short, the size standard is the largest size that a business—including all of its subsidiaries and affiliates—can be to remain classified as a small business in the eyes of the federal government.
For example, under the SBA’s standards, an accounting office that makes up to $20.5 million in average annual revenue qualifies as a small business, while an auto repair business can’t bring in more than $7.5 million to maintain “small business” status. Most manufacturing and mining industries may have up to 500 employees to be considered a small business.
These criteria are used for a sole proprietor, limited liability company (LLC), partnership, or corporation.
Take this test to determine your business’s size standard.
Further Defining a Small Business
In addition to the size standard, a business must meet the following criteria to qualify as a small business:
- Be organized for profit
- Have a place of business in the United States
- Operate largely within the United States or make a substantial contribution to the U.S. economy by paying taxes or using American products, materials, or labor
- Be independently owned and operated
- Not be the dominant company in its field on a national basis
The Only Thing That’s Constant Is Change
The SBA periodically updates the size standard in response to market conditions. Visit SBA’s website for the latest information.
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