What factors determine if I am a small business?

A common question that many entrepreneurs and business owners grapple with is whether they can be categorized as a small business from a legal standpoint. The distinction may not be that important unless a company wishes to have the ability to apply and register for government contracting under the small business category.

In order for a company to be recognized as a small business by the government their size must fall within the range that is established by the U.S. Small Business Administration.

This can be easily and automatically certified when a company registers itself as a government contractor in the System for Award Management. Generally speaking a small business is designated as such by the Small Business Administration based on either the average number of employees that have been employed in the previous 12 months or the mean annual receipts over the preceding three years.

Other requirements that must be met are that the business must be for profit. It must also have an actual geographical location within the United States. Also, its business operations must primarily serve the U.S. or at a minimum make a notably significant contribution to the country’s economy either via paying taxes or through its consumption of American made products, materials or the local labor force.

Naturally it must also be independently owned and operated and is not a dominant or near monopoly in the industry it serves at the national level. It does not matter how the company has been setup so it can be a sole proprietorship or partnership even a corporation or any other type for that matter. The determining factor, which is the size, varies and is summarily dependent on the industry in which the business operates.

Source: U.S. Small Business Administration, “Am I a Small Business?,” Accessed June 15, 2015