Small business constitutes a major force in the U.S. economy. There are more than twenty-seven million small businesses in this country, and they generate about 50 percent of our gross domestic product (GDP) (Office of Advocacy, 2010).
The millions of individuals who have started businesses in the United States have shaped the business world as we know it today. Some small business founders like Henry Ford and Thomas Edison have even gained places in history. Others, including Bill Gates (Microsoft), Sam Walton (Wal-Mart), Steve Jobs (Apple Computer), Michael Dell (Dell, Inc.), Steve Case (AOL), Pierre Omidyar (eBay), and Larry Page and Sergey Brin (Google), have changed the way business is done today.
Growing Small Businesses in the U.S.
A small business is defined as a business (corporation, limited liability company or proprietorship) with 500 employees or less. According to the U.S. Small Business Administration (SBA), small businesses represent 99.9 percent of all U.S. businesses. Small businesses created 1.9 million jobs in 2015 with some of the smallest firms – those with 20 employees or less – adding over half of the positions with a 1.1 million increase. As of 2018, the SBA estimates there are 30.2 million small businesses employing a total of 58.9 million workers.
Economic Growth
Small business brings a great deal of innovation to any field. Small businesses are usually in more direct contact with consumers and the general population. This means they are more attuned to what products and services would best serve the common good. With fewer levels of hierarchy to wade through, small businesses are also generally more open to trying out new ideas in a shorter time frame. All of this innovation benefits the area a business is based out of since they start from home out. New products, concepts, processes, and so on, get their start in the communities they come from.
The Money Earned Stays in the Community
When a large chain like Starbucks, Walmart, or Uber Eats opens in a community, a portion of the profits leave the city (likely the state) and contribute to corporate earnings. While local residents certainly earn salaries by working for these companies, most of the money doesn’t stay in the area.
Consider Uber Eats, which typically takes a 30% fee on most restaurant orders. Part of that money goes toward paying the driver, but most of it goes to Uber’s shareholders.
The Engine That Keeps the Machine Running
According to a report issued by the Small Business Administration (SBA) in 2019, small businesses account for 44 percent of economic activity in the United States. Small businesses create two-thirds of new jobs and deliver 43.5 percent of the United States’ gross domestic product (GDP). In addition to keeping the economy running, small businesses also lead the way in innovation.
Programs to Help Small Businesses
The federal government recognizes the important role of small businesses. It targets programs for small business owners in most major legislation. Here are some examples.
Tax Cuts
The Tax Cuts and Jobs Act of 2017 helped small businesses that are pass-through businesses. These include sole proprietorships, partnerships, limited liability companies, and S corporations. They also include real estate companies, hedge funds, and private equity funds.
The Act offers them a 20% standard deduction on qualified income. This deduction ends after 2025. The deductions phase out for service professionals once their income reaches $157,500 for singles and $315,000 for joint filers.
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