Importance of Small Business to the Economy of the USA

Small businesses in the USA account for more than 40% of the country's economic activity. They create two-thirds of new employment opportunities, thus reducing the number of unemployed individuals in the country (Edmiston, 2007). Small businesses need to integrate sophisticated technology into their operations and continue engaging human resources to carry out manual tasks. The employed individuals earn income, thus increasing their purchasing power and contributing to a raised standard of living. The business contributes to more than 35% of the total revenue collected in the country (U.S. Small Business Administration, 2011). Small businesses pay taxes to the local and state authorities. The revenues include local property taxes, business permits, and other relevant licenses based on the type of business. The successful small business improves property values in the local communities, thus generating more taxes for the government. The collected revenues by the government are used to fund other sectors like education, security, and infrastructure development.

Small businesses raise the country's gross domestic product. They provide a market for locally produced goods, thus earning income for the local producers (Edmiston, 2007). The businesses avail goods and services for the locals, thus ensuring their availability hence addressing the problem of shortage. Small businesses lead to the development of large-scale businesses, such as banks and insurance companies, which contribute to economic growth. They also contribute to innovation by integrating technology into the business (U.S. Small Business Administration, 2011). For instance, businesses have adopted virtual bookkeeping. The technology reduces wastage in small businesses, thus reducing losses of finances. Businesses attract talent who innovate by inventing new products or developing solutions to existing problems. Innovative ideas benefit large-scale businesses through outsourcing.

References

Edmiston K (2007). The Role of Small and Large Businesses in Economic Development

U.S. Small Business Administration, (2011). How important are Small Businesses to the U.S. Economy? U.S. Small Business Administration, Office of Advocacy