Thursday, December 22, 2011

What Is A Micro-Business?

The European Union makes a general distinction between self-employment, micro,
small and medium sized businesses based on the following criteria:

0 Self-employed
2-9 Micro business
10-49 Small business
50-249 Medium-size business

The US make this difference:

Small Business: The Small Business Association (SBA) has extensive descriptions for what constitutes a small business, but in its simplest terms it’s an organization with 500 or fewer employees. Of the 119.9 million non-farm employees out there, 60.2 million belong to a small business.

Microbusiness: The American Association of Microbusiness considers to micro businesses to consist of five or fewer employees. According to the SBA, we had 21.7 million microbusinesss in 2007. This segment accounts for only 3 percent of revenue in the business world, yet they constitute three-fourths of commerce. Microbusinesss in this context means a firm with no hired employees with net earnings of at least $1,000 ($1 for construction firms) that are subject to federal taxes.

The term microenterprise connotes different entities and sectors depending on the country.

Generally speaking, in developed countries, microenterprises comprise the smallest end (by size) of the small business sector, whereas in developing countries, microenterprises comprise the vast majority of the small business sector—a result of the relative lack of formal sector jobs available for the poor. These microentrepreneurs operate microenterprises not by choice, but out of necessity.

Microenterprises add value to a country's economy by creating jobs, enhancing income, strengthening purchasing power, lowering costs and adding business convenience.

Because microenterprises typically have little to no access to the commercial banking sector, they often rely on "micro-loans" or microcredit in order to be financed. Microfinance institutions often finance these small loans, particularly in the Third World. Those who found microenterprises are usually referred to as entrepreneurs.

The terms microenterprise and microbusiness have the same meaning, though traditionally when referring to a small business financed by microcredit the term microenterprise is used. Similarly when referring to a small, usually legal business that isn't financed by microcredit, the term microbusiness is used.