Whether you’re an accountant, hair stylist or artisanal baker, it takes a lot of time, energy and hard work to start a small business. But it’s also a way to be your own boss and pursue your passions. Many people dream of being a small-business owner, but they may be intimidated by the process of getting started or don’t know where to begin.
A small business is a privately owned corporation, partnership or sole proprietorship that is usually smaller than large businesses in terms of employee size and annual revenue. The official definition of a small business varies worldwide, but in the United States, a company can qualify as a small business with fewer than 500 employees or less than a specific annual revenue threshold (which varies by industry).
Small businesses drive innovation and provide many employment opportunities. In addition, they often contribute more to the economy than their larger counterparts. They also play a critical role in the local community, creating jobs and supporting charitable causes.
It’s no wonder that more people than ever want to run their own businesses. However, small-business ownership is not for everyone. Just as owners stand to profit more if their business succeeds, they’re more likely to experience financial distress if their business fails. Many small-business owners put their life savings into their companies and are often responsible for all aspects of the business, including customer service.
To be a successful small-business owner, you must understand the unique challenges that come with running your own business and the specific legal requirements associated with the industry you operate in. A good starting point is to obtain a North American Industry Classification System code and reference the Small Business Association’s table of size standards by NAICS code to determine if you meet the government’s official definition of a small business.