Small businesses contribute greatly to the economy by offering jobs, and local products, paying sales and property tax, and using local vendors and supporting services. This year alone, small businesses have created millions of job opportunities.
What’s even more impressive is the fact that these jobs have been created in almost every industry you can think of, including finance, manufacturing, construction, transportation, healthcare, and retail trade. Not only are small businesses adding to the job market, but they also help in other ways as well.
They offer local products and services that keep money in their communities and help drive local economies. Small businesses can keep more money circulating locally by staying in your community.
Small businesses pay taxes both locally and nationally. Small business owners also contribute significantly to state and national tax bases through property, corporate, and personal income taxes.
These small businesses also rely on local vendors and services to supply their needs. As a result, local vendors get a boost in sales and gain new customers, helping those companies as well. The economic impact of small businesses isn’t only felt by their employees and owners; they offer an impact that benefits everyone.
What is a Small Business?
A small business (also known as a small enterprise, small shop, or independent business) can be defined in many different ways, including being an independently owned and operated organization with fewer employees than an organization classified as a large business.
Having less revenue than an organization classified as a large business and/or specializing in one or more products or services in contrast to an organization classified as a large business that produces or sells many types of products or services.
The legal definition of small businesses varies by jurisdiction and by country. In the United States, the size standards are set out in the Code of Federal Regulations Title 13 § 121. Under this code, a small business is defined as any concern which is independently owned and operated and which employs 25 or fewer people on at least 50 percent of its working days during the preceding 12 months.
Characteristics of a Small Business
The United States Small Business Administration (SBA) defines a small business as a business concern that is independently owned and operated, not dominant in its field of operation, and certified by the SBA as a small business. The characteristics of small businesses vary based on where they are located and what services or products they offer.
- Are independently owned and operated
- They are not dominant in their field of operation.
- Have been certified by the SBA as a small business.
- All work within the organization falls under the management of the owner.
- They operate in a more localized manner, for example, being a smaller company or even a single product made in one area.
- Due to their labor-based economy, they depend on little on technology.
- Unlike large industries, they are open to sudden changes because they are small.
- They often use local and in-season produce and limit their waste by carefully utilizing their ingredients.
Types of Small Businesses
There are many types of small businesses, each with unique challenges and advantages. The most common types of small businesses are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.
- A sole proprietorship is the simplest form of business, where one person owns the company and receives all profits.
- Partnerships involve two or more people who share profits in the business together.
- An LLC offers protection from personal liability for business debts or lawsuits to its owners, but it doesn’t have to pay taxes as an entity on the income it makes because it’s considered pass-through taxation instead of corporate taxation.
- A corporation can enjoy some of these benefits but also has limited liability from business debts and lawsuits against its owners. Corporations are taxed separately from their owners in most countries, though it’s common for corporations to pass some money on to shareholders.
Examples of Small Businesses
In today’s economy, small businesses are more important than ever. They bring jobs and revenue to local economies by offering jobs, and local products, paying sales and property tax, and using local vendors and supporting services.
There are many examples of small businesses that help support local economies. Most towns have a small, family-owned restaurant or shop. For example, in most towns, there is a family-owned Mexican restaurant and pizzeria where people often eat dinner after work or school. The owners live in their neighborhood and hire local students to work at their restaurants to gain experience while they earn money for college.
Another example of a small business in my community is a local grocery store, which employs many people who live in our town and others who commute daily from other areas of town. The owner also owns an auto parts store that supports his grocery store by paying rent on its location and offering various discounts to customers based on certain promotions.
Why are Small Business Good for The Economy
Small businesses are the backbone of the American economy, responsible for creating two-thirds of all new jobs in the U.S. each year. They are responsible for more than half of the private sector workforce and generate more than half of the nation’s gross domestic product (GDP).
According to a report from the Small Business Administration, small businesses account for 44% of America’s economic activity. Small businesses account for two-thirds of new jobs and generate 43.5% of the U.S.’s gross domestic product. Some key reasons why small businesses are good for the economy include but are not limited to:
- They Provide Jobs- With small businesses accounting for 63% of new jobs in the U.S. over the past 20 years, they are a critical part of our economy.
- They Foster Innovation- Small businesses are often at the forefront of innovation, coming up with new ideas and products that improve our lives.
- They Help Local Economies- When you shop at a small business, more of your money stays in the local economy, which is good for everyone.
- They Keep Things Interesting- Without small businesses, our world would be a lot less interesting and varied. Think about the unique products and services your favorite small businesses offer!
- They Keep Prices Down- Price competition between businesses means getting better deals and lower prices, making it easier to enjoy life.
Where can Small Business Find Support?
Plenty of resources are available to help small businesses start and grow. The U.S. Small Business Administration (SBA) is a great place to start. They offer counseling, training, and financing programs specifically for small businesses.
There are also numerous online resources, like SCORE, that provide free mentoring and advice. And don’t forget your local Chamber of Commerce or Economic Development Corporation—they can also provide valuable information and assistance.
You may also want to consider joining or forming a business association if you’re just starting out. Trade groups and professional organizations help you network with other business owners in your area, providing invaluable support that can help build your credibility, business contacts, and reputation in your industry. And membership fees for these associations can be tax deductible too!
How Can Small Business Reach Customers
There are several ways to find customers for your small business. You can start by advertising locally through flyers, posters, and word-of-mouth. You can also find customers online through sites like Etsy or by creating a website for your business. Keep in mind that building up a customer base takes time and effort, so don’t get discouraged if you don’t see results immediately.
You can find clients on sites like Craigslist and Amazon if you’re looking for more immediate results. Selling products and services online makes reaching new customers easier, but you’ll still need to advertise if your business relies on foot traffic for customers.
If that’s your situation, it may be worth investing in a sign or flyer design so people passing by know what you offer. As a bonus, most websites will let you create a free website or store page with contact information that gives visitors an easy way to learn more about your business without having to search through multiple platforms.
Another place where small businesses can find customers is by using social media sites like Facebook, Twitter, Pinterest, and Instagram.
