Virtual General Counsel LLC
Virtual General Counsel LLC

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Is your small business a ‘micro-business?’

| Sep 8, 2020 | Business Formation |

You may have heard the term “micro-business” and wondered how that type of enterprise differs from a small business. Basically, micro-businesses are a subset of the small business community. However, there’s are no precise or agreed-upon criteria for a micro-business.

The U.S. Small Business Administration (SBA) Office of Advocacy defines a micro-business as any business with nine or fewer employees. They make up over three-fourths of all businesses, even though they employ a much smaller share of the labor force (under 11%). The so-called “FIRE” industry (finance, insurance and real estate) comprise the vast majority of micro-businesses in this country.

One author who has written on the topic of micro-businesses notes that the cost of starting one is typically under $50,000, and most micro-business owners don’t take out small business loans to fund their business.

Micro-businesses that start out as hobbies and turn in to businesses as people discover that they can sell their products via online stores or through their website are becoming more common as consumers increasingly shop for just about everything online.

Micro-businesses, no matter their size, are still businesses and subject to local, state and federal laws. The author recommends that micro-business owners structure their companies as limited liability companies (LLCs) rather than sole proprietorships. While LLCs are subject to more regulations, this type of structure protects the owner(s) from having personal liability in a lawsuit against their business.

If you’re starting a business of any size, it’s wise to seek the guidance of an experienced attorney. They can anticipate issues that you may not have considered and help you take steps to protect yourself and your new enterprise.