Among the things that an entrepreneur needs to have in mind is, the size of the small business they hope to set up. The size is important when it comes to issues like financing and management. The Small Business Administration agency has put up some guidelines in helping determine what size is standard for what enterprise. It has come up with regulations that are captured in the small enterprises act, as required by the Code of Federal Regulations.
By determining the standard size of any line of business, the SBA is also able to determine the eligibility for financial assistance for such an enterprise. A small enterprise may not be given the same amount of money as a medium enterprise. The financial requirements for these two differ by far. For example, while a small enterprise may have 100 employees, a medium one may have over 500 employees and would therefore need more funds to pay them.
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The size of an enterprise is also considered a key factor when issues of affiliation arises. Affiliation refers to the association with other enterprises that operate in the same line as your enterprise. Eligibility for affiliation is dependent on such factors as common ownership, identity of interest and common management. Power to control the other depends on the percentage of ownership bestowed upon any of the controlling enterprises. If a party has more than 50% ownership, then it has the power to control.
To determine the size of your enterprise, make use of the American Industrial Classification System, which is available online. It classifies enterprises according to products sold, number of employees, average annual receipts among other criteria. If your enterprise does not meet the standard size, consult the SBA and let them advice you on what to do. If you have any size protests to make, you can take it up with the agency.
How to Determine Small Business Size
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