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What is a small business?

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Quick Answer

A small business is a for-profit, independently owned and operated business entity that does not dominate its field. The size of the business factors in, but is based on industry and income generated over a specific period of time.

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Full Answer

A small business is often measured by the number of employees it has. However, the size of a business is only one piece of criteria used to designate what constitutes a small business. Employee size varies from one industry to another. For example, a wholesale company's small business status might top out at 500 employees, but for a manufacturer, a business with 1,500 employees may still be considered a small business.

The amount of annual income a business generates also factors into its business size, but again, whether or not an entity is classified as a small business varies based on industry. Depending on the services the business offers, a service-based business can have receipts between $2.5 and $21.5 million. For construction or heavy-equipment companies, annual sales receipts cannot exceed $13.5 to $17 million, and special trade construction cannot exceed $7 million in sales receipts. Retail businesses that wish to remain classified as small businesses cannot exceed $5 to $21 million in a year.

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