Small businesses are a vital part of the economy, and they also provide great job opportunities. These enterprises play an important role in bridging social issues such as inequality and addressing the digital divide. But starting a business comes with its own challenges, including financial risks and the risk of burnout.
In the United States, there are 30.2 million small businesses, accounting for 99.9% of all businesses in the country. These firms are responsible for creating 1.5 million jobs every year, and they pay 39.4% of private sector wages. Small businesses are also more likely to employ women and minorities than larger companies.
Defining what is considered to be a small business is challenging as it varies by industry and revenue size. However, the Small Business Administration (SBA) sets a set of size standards by industry that determines which businesses qualify for federal programs and grants. These standards range from revenue to employee count and legal structure.
The SBA’s small business definition includes any for-profit company that is owned and operated independently, with fewer than 500 employees and less than $7 million in revenue. These firms may be structured in any legal way, from a sole proprietorship to a corporation. They can also be registered as nonprofits.
Regardless of their size, all businesses require money to get started and grow. This money can be from personal funds, investors, or loans. It’s also wise for these enterprises to consider getting business insurance. This coverage protects them from unexpected events such as property damage or a customer lawsuit.