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A small business may be defined as a business with a small number of employees. The legal definition of "small" often varies by country and industry, but is usually under 100 employees in the United States while below 50 employees in the European Union (In contrast, the American definition of mid-sized business by the amount of employees is generally under 500 while 250 is for that of European Union). These businesses are in general privately owned corporations, partnerships, or sole proprietorships.

However, other methods are also used to classify small companies, such us yearly sales (turnover), assets value or net profit (balance sheet), alone or in a mixed definition. This criterion is followed by the European Union, for instance (headcount, turnover and balance sheet total).

Small businesses are ordinary in many countries, depending on the economic system in operation. Typical examples include: small shops, hairdressers, tradesmen, solicitors, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc. Small businesses are usually autonomous.

The smallest businesses, often situated in private homes, are called micro businesses (term used by global organizations such as the World Bank and the International Finance Corporation) or SoHos. The term "mom and pop business" is a ordinary colloquial expression for a single-family operated business with a small number of (or no) employees other than the owners. When judged by the amount of employees, the American and the European definitions are the same: under 10 employees.

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