Small Businesses

What is a "Small Business"?

The RFA/SBREFA references the definition of "small business" found in the Small Business Act. The Small Business Act further authorizes the Small Business Administration (SBA) to define "small business" by regulation. The SBA's small business definitions are codified at 13 CFR 121.201. The SBA defines small business by category of business using North American Industrial Classification System (NAICS).¹ For example, in the case of manufacturing, generally defines small business as a business having 500 employees or fewer. For many types of manufacturing, however, the SBA's size standards define small business as a business having up to 750, 1000 or 1500 employees, depending on the particular type of business. In the case of agriculture; mining; and gas and sanitary services, the SBA size standards generally define small business with respect to annual receipts (from $0.5 million for crops to $25 million for certain types of pipelines). The SBA definition of a small business applies to a firm's parent company and all affiliates as a single entity.

The RFA/SBREFA also authorizes an agency to adopt and apply alternative definitions, "which are appropriate to the activities of the agency" for each category of small entity (i.e., small business, small organization and small governmental jurisdiction). To adopt an alternative definition agencies must provide an opportunity for public comment and publish the alternative definition in the Federal Register. To adopt an alternative definition of "small business," agencies must also consult with the Chief Counsel for Advocacy of the SBA.

¹ The current SBA's size standards, based on the North American Industrial Classification System (NAICS), can be found at SBA's Office of Size Standards.

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Small Businesses

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