Just what does Romney mean "Small business"

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celestemekent

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Sep 7, 2012
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A small business is one that files it taxes as a single individual, has less than 100 owners/partners and the actual level of income is irrelevant. So a small business could have 40 partners an income of $500 million and still be called a "small business" under the IRS rules. Corporations with stocks sold on exchanges are the other main source of big business, but even that category can be misleading since most doctors offices are incorporated and do not fall into the rubric of small business. In fact corporations need not have more than a very few people/employees. This is just one of the many confusing ways Romney can use these definitions to get what he wants. Bain Capitol is a small business for instance but 90% of us looking at their yearly income would call them big business.

A better way to categorize companies is by their income not by the type if structure they have so there would be companies with less than $1 million billable sales, companies with less than $100 million in sales, companies with more than $100 million in sales. Those categories have far more significance than calling them by some arcane IRS designation.
 
Usually when a presidential candidate mentions small business its assumed that he or she is speaking about family-owned businesses that are struggling to survive. These can either be incorporated or LLP, LLC, sole proprietorship or whatever type of legal setup there is. The thing that differentiates them from what most people consider big business is their number of employees and the span of their operating facility/s - usually meaning local and maybe interstate businesses only (operating in only 2 or a few states), but not national or international businesses.
 
But do you realize that Romney includes Bain Capitol within the small business definition (due to the IRS definition) and they billed billions over the years.

The problems have always been who the mystical "job creators" are? Mom and pop shops do not hire the majority of people. Certainly the small professional corporations dont either (Doctor's offices and Lawyer's offices) When I worked for Rockwell Int'l I was laid off along with 16,000 others ( back in 1986) and they still retained over 100,000 employees. No one claims that Rockwell was a small business but when you add up all the big businesses they do add up to many millions of employees.

Frankly the wealthy whose income comes to them by manipulating stock, bonds and money have little need for employees they hire companies not their own employees.
 
Well the argument for small businesses doing the most hiring comes from the assumption that small businesses are always trying to grow to get bigger and stronger so they will always be needing more people. Remember, every big business started out as a small business.

And you can't really correlate a business's size with its revenue stream. Bain is in fact a small business that generates a lot of revenue because it is a successful capital investment company. You could say the same thing for hedge funds that employ less than 100 people, or corporate law offices with few employees that take in millions upon millions each year just in fees. There are also architectural firms that employ only a few people but rake in millions each year.
 
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So the only sort of "small business" that do grow and hire more people are the manufacturing companies. But they only grow when their customers have the money to buy more of their products. It has little if anything to do with regulations. Whatever their products, if the processes they use are toxic to people or the environment, then they need to do the responsible thing and change.
 
celestemekent said:
A better way to categorize companies is by their income not by the type if structure they have so there would be companies with less than $1 million billable sales, companies with less than $100 million in sales, companies with more than $100 million in sales. Those categories have far more significance than calling them by some arcane IRS designation.
Click to expand...

Better to whom? More significance to whom?

Ideally, businesses exist to generate revenue...sales are one indicator of performance and activity, and even that doesn't give you a full financial picture . It is one line item off of a financial statement. It doesn't indicate liquidity, it does not indicate leverage, it doesn't indicate market cap, it doesn't indicate ownership equity, it doesn't indicate asset level, it isn't even enough to perform a cash flow calculation. There are large companies with poor sales and small companies and sole proprietorships who are absolute cash cows. Should we then classify struggling corporations as small businesses? Or vice versa? No. Going off sales numbers alone doesn't give you insight into the business structure.

Speaking from professional experience, looking at businesses by number of employees or owners actually does provide relevant insight to analysts, investors, and lenders. Naturally there are other factors as well, but sales numbers alone as classification doesn't make sense.
 
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