What Determines if your Business is Small or Large?
Determining business size will depend on a variety of factors. Knowing what category in which your business falls will be important if you seek a loan, apply for grants or government programs, and will have an impact on the taxes paid and laws to which you must adhere.
Most people think of a large company as one that makes $1 million each year, but even a mom-and-pop business may fit the parameters of a large business. The Small Business Administration (SBA) utilizes one set of criteria, while the Organization for Economic Cooperation and Development defines a small business as one with 50 or more employees.
Mega businesses are in an entirely different class of their own. In the U.S., they include well-known companies such as Microsoft, Facebook, Apple and Amazon, along with General Electric, Johnson and Johnson, Exxon Mobil, and Berkshire Hathaway. All had annual receipts in the billions.
Annual Receipts
The criteria will vary depending upon the industry. A retail company with annual receipts of $7 million is considered large. However, a business with annual receipts of $35.5 million is considered small if it’s a grocery store, car dealership, or one that sells electrical appliances.
Number of Employees
A business is categorized as large by financial institutions and the Small Business Administration (SBA) if it employs a minimum of 500 people. However, the government uses employee numbers to determine business size only for those engaged in research and development or environmental services.
The Industry
Determining business size can be extremely confusing. Some types of manufacturing companies can employ 1,500 or more people and still be deemed small, while a mining company with 500 employees is considered large. Annual receipts of $33.5 million is categorized as large for building contractors, but $20 million in annual receipts is small for a dredging company. The wide range of seeming discrepancies is because the SBA factors in overhead costs for some industries.
Domestic and Foreign Affiliations
A business may be deemed large if it has control over another company or if a person or entity has a 50 percent or more majority in terms of voting stock. The same is true if it’s reliant upon or part of a larger company.
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