Recently, we shared information about the various ways a company can be legally organized. That led a user of SmallBusiness.com to ask what percentage of small businesses are organized in the various types of legal entities.
As you may recall, small businesses are legally defined by the Small Business Administration and the IRS in various ways for various reasons. For example, the SBA is charged with defining the statutory meaning of small businesses as it relates to government-backed loans and various types of contracting with the federal government. The IRS defines a small business as it relates to ways individuals and entities are compensated for the labor they provide, and thus, the way in which they pay taxes. On this chart, we are using the federal designation of two types of businesses: Businesses that have employees and businesses that do not have employees (e.g., sole proprietors, self-employed, independent contractors, freelancers).[table “” not found /]