There are over 30 million firms in the U.S., of which about 5.8 million are corp

Question

There are over 30 million firms in the U.S., of which about 5.8 million are corporations. A mere 35, 000 of these corporations have annual sales of over $50 million, and this relative handful of corporations, commonly thought of as "big business", account for over 80% of total corporate profits in this country. Are those millions of other corporations, sole proprietorships, and partnerships outside of big business fairly insignificant to the U.S. economy then? If not, then what is importance of these smaller companies to the national economy. Any company in the U.S. that plans to issue stocks or bonds is required by the Securities and Exchange Commission to provide its balance sheet and income statement to the public. Why is this requirement in place? what kind of information that would be useful to potential investors can be found in these financial statements?

Explanation / Answer

1. The importance of small business to job creation and to the U.S. economy has been the focus of the policy makers since the beginning. According to the Bureau of Labor and Statistics’ latest report, firms with 1-49 employees accounted for 40 percent of total net job growth in the third quarter of 2013, basically mirroring the 41 percent share that large firms with 500 or more employees contributed. Small businesses are the largest retail employers in the U.S. economy. As drivers of the U.S. economy, small businesses give opportunities to people with entrepreneurial spirits and the will to work hard. They are the basis of what the U.S. is founded upon, and continue to push the economy even in tight times. They produce 50 percent of the non-farm gross domestic product in the U.S. in addition to being important in other ways.

They encourage their employees to be innovative and creative, using their technical skills and common sense to create new inventions and technology. Not only are small businesses major employers and job creators, they also pay a significant chunk of U.S. workers' paychecks. As these employees spend money, additional life is breathed into the economy, making it strong. Without these small businesses, the U.S. payroll would be much smaller.

Small businesses are important due to their role in exporting to other nations. Ninety-seven percent of identified exporters are small businesses, and they produce 26 percent of the export value through their products they ship to consumers in other countries. Exporting U.S. goods to other nations also helps to keep the U.S. economy strong. Without the impact of small businesses, American exports would be much lower, which would significantly damage the U.S. economy.

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