Frequently Asked Questions

What is a small business?

The Office of Advocacy defines a small business for research purposes as an independent business having fewer than 500 employees.

Firms wishing to be designated small businesses for government programs such as contracting must meet size standards specified by the U.S. Small Business Administration (SBA) Office of Size Standards. These standards vary by industry; see www.sba.gov/size

How important are small businesses to the U.S. economy?

Small firms

  • Represent 99.7 percent of all employer firms.
  • 63 percent of net new private-sector jobs.
  • 48.5 percent of private-sector employment.
  • 42 percent of private-sector payroll.
  • 46 percent of private-sector output.
  • 37 percent of high-tech employment.
  • 98 percent of firms exporting goods.
  • 33 percent of exporting value.

Source: U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin.; Advocacy-funded research by Kathryn Kobe, (www.sba.gov/advo/research/rs299tot.pdf) and CHI Research, (www.sba.gov/advo/research/rs225tot.pdf); U.S. Dept. of Labor, Bureau of Labor Statistics.

How many small businesses are there?

In 2011, there were 28.2 million small businesses in the United States,  and 17,77 firms with 500 employees or more, according to Office of Advocacy estimates.

Over three-quarters of small businesses were nonemployers; this number has trended up over the past decade, while employers have been relatively flat.

Source: Office of Advocacy estimates based on data from the U.S. Dept. of Commerce, Census Bureau, and trends from the U.S. Dept. of Labor, Bureau of Labor Statistics, Business Employment Dynamics.

How many businesses open and close each year?

About 10 to 12 percent of firms with employees open each year and about 10 to 12 percent close (see below). Employer firm births and deaths were up in the most recently available data. Establishment birth figures from 2912 also showed gains. Nonemployer firms have turnover rates three times as high as employer firms. Business bankruptcies numbered 33,212 in 2013, a decline of about 7,000 over the previous year. Note that not all firm deaths are bankruptcies, and many business owners file personal bankruptcy instead of business bankruptcy.

 
Starts and Closures of Employer Firms, 2000–2011
Category 2000 2009 2010 2011
Births 481,985 410,038 389,774 409,040
Deaths 407,947 508,668 446,944 470,736
Notes: Source: U.S. Dept. of Commerce, Census Bureau; Administrative Office of the U.S. Courts; U.S. Dept. of Labor, Business Employment Dynamics (BED). Estimates based on Census data and BED trends.

 

What is small businesses' share of net new jobs?

Samll firms accounted for 63 percent of the net new jobs created between 1993 and mid-2013 (or 14.3 million of the 22.9 million net new jobs). Since the end of the recession (from mid-2009 to mid-2013), small firms accounted for 60 percent of the net new jobs. Small firms in the 20-499 employee category led job creation.  see www.sba.gov/advocacy/10871.
Source: U.S. Bureau of the Census.

What is the effective tax rate for small businesses?

The average effective tax rate for businesses organized a sole proprietorships was 15.1 percent in 2013, with small S corporations facing the highest rates. (An effective tax rate is usually defined as the amount paid as a fraction of net income or profit.)

Legal Form of

Business Ownership

Effective Tax Rate

(percent)

Non-farm sole proprietorship 15.1
Partnership 29.4
S Corporation

31.6

C Corporation 17.8

 

What is the survival rate for new firms?

About half of all new establishments survive five or more and about one-third survive 10 years or more. As one would expect, the probability of survival increases with a firm's age. Survival rates have changed little over time.

Source: U.S. Dept. of Commerce, Census Bureau, Business Dynamics Statistics; U.S. Dept. of Labor, Bureau of Labor Statistics, BED.

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