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Understanding Smaller Enterprise: Legal Definition and Implications
Definition & Meaning
The term "smaller enterprise" refers to a type of business, particularly in rural areas, that meets specific financial criteria. Generally, a smaller enterprise is defined as a business that, along with its affiliates, has:
A net financial worth of no more than $6,000,000 at the time assistance is provided.
An average net income of no more than $2,000,000 over the two years preceding the assistance, after federal income taxes.
If the business is not required to pay federal income taxes at the enterprise level but must pass income to its owners, the net income is calculated differently, allowing for certain deductions. Additionally, a smaller enterprise must comply with size standards set by the Small Business Administration for its industry.
Table of content
Legal Use & context
The term "smaller enterprise" is commonly used in legal contexts related to business financing and support programs, particularly those aimed at rural development. This includes various forms of assistance, grants, and loans provided by government agencies. Understanding this term is crucial for businesses seeking financial help, as it determines eligibility for various programs.
Users can manage some related processes themselves using legal templates available through resources like US Legal Forms, which provide guidance on applying for assistance and understanding compliance requirements.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A small family-owned farm in a rural area has a net worth of $5,000,000 and an average net income of $1,500,000 over the past two years. This farm qualifies as a smaller enterprise and can apply for rural development assistance.
Example 2: A local craft brewery with a net worth of $4,500,000 and an average net income of $1,800,000 meets the criteria for a smaller enterprise and is eligible for specific grants aimed at supporting small businesses in rural communities.
Relevant laws & statutes
The definition of a smaller enterprise is primarily found in the U.S. Code, specifically under 7 USCS § 2009cc. This statute outlines the financial criteria and standards for eligibility for various rural business assistance programs.
Comparison with related terms
Term
Definition
Key Differences
Small Business
A business that meets size standards set by the Small Business Administration.
May include businesses in urban areas; criteria may vary.
Microenterprise
A very small business, often with fewer than 10 employees.
Focuses on employee count rather than financial thresholds.
Common misunderstandings
What to do if this term applies to you
If you believe your business qualifies as a smaller enterprise, consider the following steps:
Review your financial statements to confirm eligibility based on net worth and income.
Explore assistance programs available for smaller enterprises through local and federal agencies.
Utilize legal templates from US Legal Forms to help with applications and compliance documentation.
If your situation is complex, consult with a legal professional for tailored advice.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.