Politicians often argue that small businesses are the lifeblood of America, the engine that fuels the country's economy. But what, exactly, is a small business -- and how big an effect do they have on daily life in the U.S.? To help illustrate the role of small businesses, we've put together this little quiz. If you've ever wondered about the little companies that could, take a peek.
Pop Quiz: Are Small Businesses Really Driving the U.S. Economy?
According to the Small Business Administration's size standards, the definition of small business varies widely, depending upon the industry that they work with. For example, petroleum refineries, ammunition manufacturers, and thirteen other businesses can qualify as "small businesses" if they have fewer than 1,500 employees.
C. $1 million
D. $35.5 million
Another way of looking at a company's size is its yearly income. For parking lots, industrial launderers, home centers and fourteen other businesses, yearly gross income of $35.5 million is the cut-off between a small business and a large one.
In the European Union, policymakers take the idea of small businesses at face value. According to the SME User Guide of the European Commission, a small business can have no more than 50 employees. Interestingly, this is also the cut-off line drawn by the Patient Protection and Affordable Care Act.
According to the Small Business Administration, a stunning 43% of all private payroll in the U.S. comes from small businesses. In other words, almost half of all privately-paid salaries come from small businesses, not big conglomerates.
Tax critics argue that increasing taxes on millionaires would cripple small businesses. In reality, however, only 3.31% of small business owners make $1 million or more per year. In fact, over 75% make less than $200,000 per year -- putting them well below the cut-off for President Obama's proposed tax increases.
Small businesses are a big part of the engine that propels the American economy -- study after study shows that they are the quickest to add jobs, the biggest growth sector of the economy, and a major contributor to GDP.
But are America's small businesses being used to sell its taxpayers a bill of goods? When huge airline manufacturers and home repair stores are getting many of the same benefits as the local mom and pop store, it's worth asking if we need to reconsider our small business standards -- and support the people who really need it.