What Exactly IS a Small Business? | Micro business Perspectives

If you?re a regular reader of this blog, you know that we very clearly define what a micro business is.? We?ve also said that they are vastly different than what many would consider to be a ?typical? small business owner.? But because it?s a business with less than 10 employees, it?s relatively easy to talk about the issues facing them.? I say relatively because in truth no issue is simple, and even by narrowing the group of businesses down to those with under 10 employees, we?re still talking about more than 25 million in the US alone.

But as we?ve said in the past, the struggles that a home based business has often do not equate to the struggles that a small business with 50 or even 100 employees has.? So why is it that when media and lawmakers talk about ?small businesses? the group is essentially assumed to be a business that has less than 250 employees, and everyone is lumped into one big group?? That seems inherently flawed given the differences between them.

But now even the government is having a hard time trying to decide who and what is a small business, and that means by re-examining who qualifies, there might actually be ?less of us? out there.? According to a recent story in the Wall Street Journal, a new analysis from the Treasury Department suggests that the pool of actual small-business owners may be smaller than officials previously thought.

The report developed a new methodology to identify small businesses, mostly to determine what their tax burdens actually were and what kind of contributions they were making to the country?s business income.? The story goes on to explain that:

?Using a broad definition of small-business owner, the report identified 20 million small-business owners in 2007 who reported $376 billion of net business income; using a narrower method, there were 12.9 million small-business owners reporting $335 billion of net business income.

The narrower methodology defined a small-business owner as someone whose active profit or loss from the business represents 25% of their income. The broad definition was anyone who had a profit or loss from their small business.?

This is interesting because as we have seen in our research and in talking to micro business owners, oftentimes they are working on a part time basis in their homes.? It stands to reason that if they aren?t devoting a full 40 hours a week to their micro business, they could still receive 25% of their income from their business while still holding another job.? So under this definition, they would certainly fall under the small business definition.

Now this report is clearly an exercise to determine how much revenue is being generated from a tax perspective and how much the government can expect in the future.? It?s also being used to speculate how new changes to the tax code could potentially impact the small business community. I think we can safely say that no new ?definitions? about small businesses are going to come about as a result.

But it helps illustrate a larger question: Are there different levels of small businesses in the US, and if so, should they be treated or defined differently according to size, income, employee count, etc.?? Or should anyone with the passion and a dream to go into business for themselves be ?defined? with the same parameters, regardless of size?

Source: http://microbusiness.vistaprint.com/2011/08/what-exactly-is-a-small-business/

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