A small business is privately owned and operated by one or more owners. They range in size from a solo entrepreneur and family-run shop to a larger company with several hundred employees. These companies play a critical role in innovation, job creation and economic resilience. Many have a local focus, keeping revenue within their communities. And they provide a path to entrepreneurship for those without large startup capital.
Running a small business can be challenging, from finding customers to paying your taxes and managing day-to-day operations. But the rewards can be great if you are successful. Entrepreneurs like Walt Disney, Richard Branson and Sara Blakely have built global companies from the ground up as small businesses. The risks can also be high if your business is not profitable or experiences a downturn. And you may have to wear a variety of hats, from sales and marketing to accounting and human resources.
Across the United States, there are approximately 33 million small businesses. The majority have fewer than 500 employees. Small businesses are a driving force in the economy, making up 99.9% of all firms and employing half of the private-sector workforce. Despite the challenges, small-business owners are optimistic about their prospects. In fact, their confidence levels are at post-pandemic highs.
Small businesses can be organized in a number of ways, from sole proprietorships and partnerships to LLCs and C corporations. Some use a combination of factors to determine their size, including revenue, number of employees and average annual receipts. Others follow specific definitions set by the Small Business Administration (SBA) or their industry’s NAICS codes. This is important because size standards are used to qualify businesses for certain government programs and contracts.
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