What Is Considered a Small Business? Official SBA Definition and Standards 2025

Learn what the SBA considers a small business, how to determine whether your business is small, and why this designation is important.

In the United States, small business is big business. Up to 99.9% of all US businesses—34.75 million in all—can be classified as small businesses. 

While the breadth of firms that fall under the definition of “small business” is expansive, it is by no means a default classification. Small businesses must meet certain requirements to qualify as such. But who sets these requirements?

Enter the US Small Business Administration. The SBA is one of a number of federal agencies that regulate and provide support to entrepreneurs and small businesses. The SBA sets standards for what is considered a small business, depending on the industry.

For example, if you’re a soybean farmer, you have a small business only if your annual receipts total less than $2.25 million. However, if you’re generating nuclear power, your business is considered “small” as long as you have fewer than 1,150 employees.

SBA small business definition

Generally speaking, the SBA defines a small business as one that employs fewer than 500 people; however, this number can vary depending on industry.

And some industries aren’t defined as “small” based on their number of employees, but rather the annual revenue they generate. The SBA also considers location, financial motivation, structure, and ownership identity when determining whether to classify a company as a small business.

 For a business to qualify as “small” according to the SBA, it must:

• Be organized for profit
• Have a place of business in the United States
• Operate primarily within the US or make a significant contribution to the US economy
• Be independently owned and operated
• Not be dominant in its field on a national scale

Meet industry-specific size standards established by the SBA

How to determine if your business qualifies as small

Figuring out whether your business qualifies as small under SBA guidelines is a straightforward process when you use the right tools.

Using the SBA size standards tool

The SBA offers a free size standards tool that makes it easy to determine if your business meets the criteria:

1. Visit the SBA size standards tool.
2. Enter your business’s NAICS code (or search by your industry if you don’t know your code)
3. Enter your business’s average annual receipts or number of employees, depending on your industry’s standard.
4. The tool will tell you if your business qualifies as small.
   

The SBA regularly reviews and updates its size standards to reflect changes in market conditions and inflation. These updates ensure that size standards remain relevant and continue to support genuinely small businesses in an evolving economy. This also means business owners should stay informed of any changes to ensure their small business status remains unchanged.

Small business size standards by industry

The SBA sets standards in terms of business size and scope on an industry-by-industry basis. The agency looks at two considerations: number of employees and average annual receipts.

The SBA publishes a comprehensive table of standards defining acceptable sizes for a qualifying small business’s workforce, and/or how much money they generate in average receipts. Some of these standards are ranges, with subclasses within an industry qualifying at varying levels. Below is an overview of maximum workforce sizes and revenue limits in certain prominent industries (as of 2023):

Employee-based size standards

Industry	Maximum employee count
Manufacturing	500–1,500
Wholesale trade	100–250
Information sector	Up to 1,500
Finance and insurance	Up to 1,500
Science and technology	150–1,500
Transportation and warehousing	550–1,500

Revenue-based size standards

Industry	Maximum annual receipts
Construction	Up to $45 million
Retail trade	Up to $47 million
Real estate	Up to $47 million
Health care	Up to $47 million
Agriculture	Up to $25 million
Finance and insurance	Up to $47 million ($850 million in assets for certain subclasses)

As there are many industries covered by SBA standards, and a number of subclasses within each industry, it is best to consider its entire list to identify the framework applying to your own field.

Understanding NAICS codes

Industries and subclasses of industry are classified for SBA benefit purposes by the North American Industry Classification System, or NAICS.

The NAICS sorts businesses into industries and assigns those groupings numerical codes. These codes are highly specific and target niche subclasses of industry. For example, 44221 applies to retail operations providing floor coverings, while 44229 applies to stores that sell general home furnishings, and 442291 applies to stores that sell window treatments.

NAICS codes allow small business owners to identify whether their metrics align with industry-by-industry qualifications for the SBA’s definition of small business.

NAICS codes are updated every so often, sometimes with changes made to qualification parameters, such as changing average annual receipt requirements to reflect fluctuations in inflation. The list was last significantly updated in 2022, with revisions continuing into 2023–2024.

How to find your NAICS code

Finding the correct NAICS code for your business is an important step in determining your small business status. Here’s how to do it:

1. Visit the US Census Bureau NAICS website.
2. Use the search function to look up keywords related to your business activities.
3. Review the detailed descriptions of potential codes to find the best match.
4. Select the code that most accurately describes your primary business activity.
5. If your business operates in multiple areas, identify all relevant codes, but choose the one representing your primary revenue source as your main NAICS code.
   

Using NAICS codes for small business qualification

Once you have your NAICS code:

1. Look up your code in the SBA size standards table.
2. Note whether your industry is measured by employee count or annual receipts.
3. Compare your business metrics to the standards for your specific code.
4. Use this information when applying for small business programs, loans, or contracts.
   

Small business owners self-select their NAICS classification. If your small business operates in multiple fields, you may need to choose more than one. You can get assistance from the US Census Bureau in selecting the right code or codes by emailing naics@census.gov, or calling 888-756-2427.

Small business certification programs

Beyond meeting size standards, small businesses can obtain official certifications that provide additional benefits and contracting opportunities.

Benefits of getting certified

Small business certifications offer several advantages:

• Priority access to government contracting opportunities
• Set-aside contracts exclusively for certified small businesses
• Networking opportunities with government agencies and prime contractors
• Marketing advantages when pursuing both public and private sector work
• Access to specialized business development programs
  

Types of small business certifications

The SBA offers several certification programs for qualifying small businesses:

• 8(a) Business Development Program: For socially and economically disadvantaged business owners
• Women-Owned Small Business (WOSB): For businesses that are at least 51% owned and controlled by women
• HUBZone: For businesses operating in historically underutilized business zones
• Veteran Small Business Certification: For businesses owned by veterans, as well as service-disabled veterans
  

Each certification has specific eligibility requirements and application processes, but all provide valuable opportunities for small businesses looking to grow through government contracting.

Advantages of operating as a small business

Federal contracts

The primary advantage of receiving a “small business” designation from the SBA are opportunities for federal financial assistance and being awarded contracts from government agencies. To be awarded a contract from the federal government, you must register your small business with the System for Award Management—a database through which the government tracks equity in distributing contracts between US businesses of varying sizes. The US government aims to award at least 23% of all federal contracting dollars to small businesses.

Small business financing options

Small business status may also render your company eligible for certain types of federally backed loans. SBA loans typically enjoy lower interest rates and longer repayment terms than those offered by conventional lenders. It may also be easier for your small business to qualify for such a loan than one offered by a large, private bank. Small businesses can also access other kinds of loans, such as Shopify Capital, which grants vendors cash advances based on previous sales.

*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.

Ultimately, the amount you can borrow will depend on the type of SBA loan you are able to apply to, depending on the industry, NAICS classification, and any accompanying limitations.

State small business definitions

While the SBA definition is the standard for federal purposes, it’s important to understand that small business definitions can vary significantly based on location and context.

How definitions vary by state

Many states have their own definitions of what constitutes a small business, often with thresholds that differ from federal standards:

• Some states set lower employee counts (often 50 to 100 employees) for small business designation.
• Revenue thresholds frequently vary from the SBA standards, typically lower.
• Certain states create specialized definitions for specific tax incentives or development programs.
• Local municipalities may have their own small business designations for local contracting or support programs.
  

These varying definitions can affect eligibility for state-level grants, loans, technical assistance, and procurement opportunities.

Small business FAQ

How do you define small business?

Small business is generally defined as any business that is independently owned and operated, typically with fewer than 500 employees.

What is a small business example?

A small business example is a bakery. This type of business typically requires little to no startup capital and can be operated from a home kitchen or a retail storefront. A bakery may offer breads, cakes, pastries, and other baked goods to customers.

What are the five types of small business?

The five types of small businesses are: Sole proprietorship, Partnership, Limited liability company (LLC), Corporation, and Cooperative.

How do size standards affect Shopify merchants?

For Shopify merchants, understanding SBA size standards is important for several reasons: eligibility for SBA loans, grants, and programs; access to certain tax benefits; the ability to market as a small, independent business; and better long-term business planning as growth may affect eligibility for specific programs.