What is a Small Business

The Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation."  The law also states that in determining what constitutes a small business, the definition will vary from industry to industry to reflect industry differences accurately. 

When the U.S. Congress first established SBA, the fundamental question was just what numerical definition should SBA use to define small businesses, industry by industry, to determine what businesses were eligible for SBA's programs.  Over the years SBA has established and revised numerical definitions for all for-profit industries, and this numerical definition is called a "size standard."  It is almost always stated either as the number of employees or average annual receipts of a business concern. 

In addition to establishing eligibility for SBA programs, all federal agencies must use SBA's size standards for its Federal Government contracts it identifies as a small business.  Agencies must also use SBA's size standards for their other programs and regulations, unless they are authorized by Federal statute to use something else.

In addition to establishing eligibility for SBA programs, all federal agencies must use SBA's size standards for its Federal Government contracts it identifies as a small business.  Agencies must also use SBA's size standards for their other programs and regulations, unless they are authorized by Federal statute to use something else.

SBA's Office of Size Standards develops and recommends small business size standards to the Size Policy Board and to the Administrator of SBA.  These include recommendations on small business definitions that other Federal agencies propose.  Under the Small Business Act, Federal agencies must obtain the approval of the SBA Administrator before adopting a size standard different from SBA's size standard.

Summary of Small Business Size Standards

Small Business is one that

• is organized for profit;
• has a place of business in the United States;
• makes a significant contribution to the U.S.  economy by paying taxes or using American products, materials or labor; and,
• does not exceed the numerical size standard for its industry. 

The business may be a sole proprietorship, partnership, corporation, or any other legal form. 

There is an SBA small business size standard for every private sector industry in the U.S.  Economy.  SBA uses the North American Industry Classification System (NAICS) to identify the industries. 

Size Standards (usually stated in number of employees or average annual receipts) represent the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA’s programs and for Federal contracting programs. 

SBA has several general Size Standards.  A business in one of the following industry groups is small if it is not greater than the size standard indicated. 

Summary of Small Business Size Standards

A Small Business is one that:

• is organized for profit;
• has a place of business in the United States;
• makes a significant contribution to the U.S.  economy by paying taxes or using American products, materials or labor; and,
• does not exceed the numerical size standard for its industry. 

The business may be a sole proprietorship, partnership, corporation, or any other legal form. 

There is an SBA small business size standard for every private sector industry in the U.S.  Economy.  SBA uses the North American Industry Classification System (NAICS) to identify the industries. 

Size Standards (usually stated in number of employees or average annual receipts) represent the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA’s programs and for Federal contracting programs. 

SBA has several general Size Standards.  A business in one of the following industry groups is small if it is not greater than the size standard indicated. 

If the size of a business exceeds the size standard for its overall industry group, it may still be a small business for the specific NAICS industry in that group.  Some industries have higher size standards than the general one for the industry group.

For more information, use the following links:

Small Business Size Regulations

Table of Small Business Size Standards

SBA Office of Size Standards

Office of Government Contracting

Office of Hearings and Appeals (OHA)