How Does the Government Classify Businesses by Size?

The U.S. Small Business Administration determines the sizes of small businesses in terms of giving assistance to small business owners. Different industry standards set the sizes of small businesses based on the amount of annual revenue or the number of employees. For example, the government considers an agricultural business small when it generates $750,000 or less in annual revenue. However, manufacturers are classified as small businesses when they employ between 500 and 1,250 people, depending on the specific sector.

The government uses several industrial criteria to ascertain whether a business is small. The SBA takes into account how an industry is structured as a whole, the technological changes, similar products in other industries, growth trends and the history of an industry, among other data. Standards change periodically because the government re-evaluates loan and assistance programs to small businesses.

For statistical purposes, a medium-sized business generally employs between 100 and 999 people. This type of enterprise typically generates between $50 million and $1 billion annually. These standards, not necessarily used for government statistics, help companies determine how to do business with each other. For instance, a small- or medium-sized enterprise has different IT requirements than a large corporation. Businesses need to know the general size of another business to gauge the needs of an enterprise.

Forbes estimates the United States has approximately 27 million small businesses, and around 5.7 million small business have employees. Small businesses comprise 86 percent of all companies with more than 500 employees. In terms of large corporations, a total of 579 American companies made the 2015 list of the world's 2,000 largest companies. Berkshire-Hathaway is the largest U.S. company, followed by JP Morgan Chase. Sales, profits, assets and market value are four factors that determine these rankings.

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