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What is a Small Business?

The Obamacare requirements for employers to provide heath insurance to employees are new and complex. One of the significant provisions is the requirement that employers are subject to what is called “Employer Shared Responsibility”

However the IRS web site says the following:
“To be subject to the Employer Shared Responsibility provisions for a calendar year, an employer must have employed during the previous calendar year at least 50 full-time employees …….”

In this context, it seems that small business is defined as having less than 50 employees.

We see the word “SMALL” in government programs such as bidding on Federal Government Contracts, Small Business Association programs, HUD (Housing and Urban Development) programs, and many others.

The Office of Management and Budget maintains a table labeled “Table of Small Business Size Standards Matched to North American Industry Classification System Codes” (NAICS). There are more than 1,000 different types of business listed.

There are generally two types of categories identifying small businesses; average annual revenue running from $750,000  to $38,500,00, and number of employees from 100 to 1500.

The Small Business Administration has identified various classifications of business that are eligible for favorable treatment:

  • Small Business Set Aside Program
  • Small Disadvantaged Business (SDB) Certification Program
  • 8 (a) Business Development Program
  • HUBZone Empowerment Contracting Program (Historically Underutilized Business Zone)
  • Service-Disabled Veteran-Owned Small Business (SDVOSB)
  • Veteran-Owned Small Business (VOSB)
  • Women-Owned Small Business (WOSB)

For a business to qualify for one of these programs, there are additional requirements having to do with control, net worth, and personal experience. But they are all defined as SMALL.

It seems therefore that the term “Small Business” is defined in context, and for many government rules and opportunities, much research is needed.