Entrepreneurs have big ideas, but that doesn’t mean that they always run big businesses. While the headlines are dominated by America’s largest companies, you may be surprised to learn that the Small Business Administration’s (SBA) Office of Advocacy reports that there are over 30 million small businesses in the United States, comprising 99.9 percent of all businesses in the country! Of course, what the SBA considers a small business may seem like a big business to you. Taking a closer look at the legal definition of small business may help explain that statistic.
You may think of a small business as the mom-and-pop grocery store on the corner or the woman down the street who runs a dog-walking business. But from a legal perspective, any business that is owned and operated independently and that is not dominant in its specific industry is a small business. The Small Business Administration has instituted guidelines and standards that further define small businesses based on their industry and how many employees employed or the amount of revenue it generates in a one-year period. Other organizations, including the federal government, also have their own defining characteristics, including being for-profit organizations and operating largely within the country.
If you’re unfamiliar with the various types of legal entities that a business can take, you may think that a small business can only be owned by a single person or partnership, but that is not the case. In fact, choosing the most appropriate legal structure is one of the first decisions that any new business owner needs to make. The options range from sole proprietorship to full-fledged corporation, and the selection will determine many aspects of how the business can pursue funding and file taxes, as well as its liabilities.
Setting up your small business is not as simple as letting people know about your products or services. There are important steps that need to be taken to ensure that you are operating legally. These include selecting your business’ name, registering with state and local governments, obtaining federal and state tax identification numbers, and more. You may also need to create partnership agreements, employment agreements, and contracts for your business’ use.
For assistance in making sure that your small business is fully prepared to operate within all legal parameters, contact our experienced small business attorneys today.