United States

Abstract

The United States Small Business Administration (USSBA) broadly classifies small businesses as any firm with 500 or fewer employees.The USSBA has two different approaches for defining small firms. The first approach is to define any firm with less than 500 employees as small. This practice was first established by the Small Business Act of 1953. However, the same Act required the USSBA to establish a size standard that should vary to account for differences among industries. Second, the Act called on the USSBA to assist small businesses as a means of encouraging and strengthening their competitiveness in the economy. These two considerations are the basis for the SBA current methodology for establishing small business size standards. For further details see The US Small Business Administration (2009) SBA Size Standard Methodology. These firms account for more than 5 million businesses, or 99% of all firms. They employ slightly over half of the private sector’s employees, pay about 44% of the total private sector payroll, generate about 65% of net new private sector jobs, and create more than half of the nonfarm private Gross Domestic Product.For more details on the importance of small businesses in the US economy see The US Small Business Administration, Frequently Asked Questions.