BOX 2-2
Generic Definitions for Small Businesses, 13 Code of Federal Regulations, Part 124

A small business is organized for profit; has a place of business in the United States; pays taxes or uses American products, materials, or labor; and does not exceed the numerical size standard for the industry. It may be a sole proprietorship, partnership, corporation, or any other legal form.

There is a small business size standard, usually stated as the maximum qualifying number of employees or average annual receipts, for every private sector industry defined in the North American Industry Classification System (NAICS). There are general size standards for industry groups: for example, 500 employees for a manufacturing business; 100 employees for a wholesale trade business; $28.5 million average annual receipts for a general or heavy construction business (except dredging); and $3 million average annual receipts (including commissions and other income) for a travel agency. Some industries have higher size standards than the general one for the industry group. See for details [December 2004].

A socially disadvantaged small business is one that is at least 51 percent unconditionally and directly owned by one or more individuals who are U.S. citizens and determined to have suffered from bias or discrimination. The law allows groups to petition to be designated as socially disadvantaged; and a 1978 amendment to the Small Business Act designated minorities as such.

An economically disadvantaged small business is one that is at least 51 percent unconditionally and directly owned by one or more individuals who submit financial and narrative information that the SBA determines qualifies them for the designation. For initial designation as eligible for the Section 8(a) Program, the net worth of an individual claiming disadvantage must be less than $250,000; for continued eligibility after initial admission to the program, the individual’s net worth must be less than $750,000 (in both instances excluding equity in one’s primary residence and equity in the socially and economically disadvantaged small business).

A small disadvantaged business (SDB) is an economically disadvantaged small business certified by the SBA, except that the net worth of the owner can be as high as $750,000 (excluding equity in a primary residence and in the SDB). The Department of Transportation classifies women-owned small businesses as a “disadvantaged business enterprise” (DBE).

A woman-owned small business is “one that is at least 51 percent owned by one or more women; and whose management and daily business operations are controlled by one or more of such women.” A woman-owned small business may also qualify as socially and economically disadvantaged. Self-certification as a woman-owned business is currently allowed.

NOTE: Other categories of small businesses may receive preferential treatment: veteran-owned small businesses, service-disabled veteran-owned small businesses, and “HUBZone” small businesses (see [December 2004]).

SOURCE: Compiled from information on the SBA web site,

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