Small Business

Small business are privately own business. It is a business that has about one to fifty employees or a business with revenue less than $1.5 million in gross annual sales.

The word small business has various definition based on jurisdiction.

The European Commission Enterprise and Industry define small business as a business with less than fifty employee and a turnover of less than or equal to ten million Euro or a balance sheet of less than or equal to ten million Euro.

In America the definition of small business is looked at from the point of view of the SBA.

The SBA defines small business as a business concern that is independently owned and operated for profit reason. It continues by dividing small business into the following standard sizes;

. Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;

• Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided;

• Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided;

• Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided;

• General and Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction;

• Special Trade Construction: Annual receipts may not exceed $7 million; and

• Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product. (

Always check with incorporation bodies within your jurisdiction to know if your business comes under a small business or not if you are not sure.

                      Types of Small business

Sole Proprietorship

Sole proprietorship is a type of business in which the business is owned and managed by just one person and he/she has all the rights to take decisions. Sole proprietorship is a business that is easy to start up if can take few regulations and control over the business. Since there is no partnership in the business, the sole proprietor enjoys unlimited freedom within the precincts of his workplace. You also have unlimited liability which means any business debt can be met from your own personal wealth if the venture fails. Sole proprietor takes the profit when the business is going on well. Unlike corporation that thinks about double taxation and pays corporate taxes, the sole proprietor pays self employment taxes on the profits made, making accounting much simpler and does not have to think about double taxation.


Partnership is a type of business structure in which some people come together to start a business and share the profits or losses. These people are called partners and they own the business together. Partnership is divided into three types:

• The first one is general partnership which consists of general partners. Each general partner takes part in the management of the business, and also takes responsibility for the liabilities of the business. When one of the partners is sued, all partners are held liable.

• Limited partnership: this includes both general partners and limited partners. General partners participate in the day-to-day management of the business while limited partners do not and his/ her liability is limited. Most of the times, the limited partners are only interested in investing and to receive a share of the profits.

• In Limited liability partnership (LLP), all partners have limited liability from errors, omissions, negligence, incompetence, or malpractice committed by other partners or by employees. When any of the partners get involved in wrongful or negligent acts, he/she is personally liable while other partners are protected from liability for those acts.

To form a partnership, all the members who want to form a partnership have to sign an agreement prepared by a lawyer. This agreement clearly states the terms and conditions of the partnership, the sharing of profits or losses and the distribution of common assets in case the partnership ends. Every time a new member joins the partnership, it is necessary to sign the agreement paper again.

Close Corporation (CC)

A Close Corporation is a type of small business that combines the aspects of sole proprietorship and partnership. A close corporation is easy to run and less expensive. It can be easily registered through a lawyer or an accountant. A close corporation does not have directors, shareholders or a chairperson of the board. Suppliers of a close corporation often ask for a signed security from a trusted third party, in order to make sure the debts are paid in case the Close Corporation fails.

Limited company

Public and private are the two types of limited company in which the owners are only liable for the amounts they invested. The public limited is when governmental companies come together to form a corporation while private limited when private companies form corporate bodies. To form a limited company you need to register it at Companies House, have a company name.

Advantages of Small business

The amount of capital needed to start-up the business is relatively small and banks are not willing to loan new business a huge amount of money.

• Small scale business owner get grants, financial aid and economic support that is always available to them. These grants are issued to business owners from government run programs to banks and other big business corporations.

• It is also easy to record business transactions and cash transaction which assist the business owner in keeping track of business dealings that can be easily maintained and updated regularly. Business account can be easily managed when a business owner setup an account system on his personal computer and store all the transactions that the business makes.

• It is easy to manage asset and liabilities. Assets include checking and savings accounts while liabilities include the money you owe to others.

Meet The Author

Small business guide is a site built to assist people in setting up business. I do this as a major hubby. As a prolific writer, How best will it be to have a blog that will be useful to those looking to set up or run their own business.
For more information about me please visit my Google Plus page

Small Business Blog

Disadvantages of Small business

One of the major disadvantages of small business is the conflict between the business owner and their agency or business managers. Business owners tries to make decision based on their knowledge and understanding of the business and undermine the skills and knowledge of their managers.

• Small businesses might not be able to use the economics of scale due to their size, the ability to cut costs by increasing production which might lead to higher costs than larger businesses.

• It is run on a low budget; it requires a good marketing plan and implementation of proper strategies. The improper handling of loans or investments can often lead to the downfall of a small business very quickly. It is very necessary that all the planning of a small business is firmly kept in mind when a person opts to start a small business.

• Another disadvantage of small business is that business owners tend not to pay loan and grants taken by them. Some business owner use funds taken for business purpose to pursue other personal satisfaction.

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