What is truly called small business?

Small Business means that something involves a small number of employees. But the definition of “small” varies from country to country. In U.S.A small businesses are considered as those, which are having less than 100 employees whereas in European Union it is less than 50 employees.

But other than this method of classifying small business, there are also other methods such as annual sales or turnover, assets value or net profit. We can also go by a mixed definition that is we can consider headcount, turnover and net profit altogether. In general, we can say, a small business means a business, which is owned and operated independently, that is operations and decision-making are under the total control of owners; equity is not traded publicly and financing is done by the owners and the number of employees is small. The picture will be vivid if we look at the nature and characteristics of small-business, which are as follows:

• Business operations and decision making rests in the hands of one or two persons who are owners or partners.
• Business equity is not traded publicly.
• Ownership and management are not separate in general.
• Formal contracts are kept at a minimum level.
• Personal security of owners is very important for secure business debt.

Opportunity is something very important because it is the major job provider in the most of the countries. It can be started with a low level of capital and can be operated on a part time basis. Small business operators tend to share a close relation with their clients and customers and therefore they can achieve greater accountability and responsiveness. These opportunities can be used in various forms.

Small Business can be a privately owned corporation, can be a partnership, sole proprietorship, or franchising. Partnerships are better as business opportunity compared to privately owned corporations for taxation purposes. Because in a partnership firm dividend tax is eliminated which is levied on realized profits of an ownership corporation.

Sole proprietorship also has great business opportunity which small business desperately requires. Whereas identical small business operating as a privately owned corporation or partnership submit a lengthy tax return which consists of quite a few pages and also presents quarterly and annual payroll tax returns, a sole proprietorship enjoys a lot of liberty from government regulations. Among every form of business ownerships sole proprietorship suffers from least number of government regulations.

Franchising is also a very good small business opportunity as by franchising the owners can reap the benefit of economies of scale of the big corporation (franchisor). Through franchising the owners get to use a strong brand name and at the same time they can continue having an affordable level of investment.

Small business enterprises and sole proprietors require business support system which are easily understandable and can cater to the needs of their small businesses in order to be competent and to utilize the new business opportunities properly.