What is a small business under California law?

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One of the key principles of legislative drafting is consistency of language, including definitions. Looking at who a business is, the same definition is missing in state law. In fact, California law provides more than two dozen different definitions of “small business” in the codes. Is this lack of a coherent definition problematic?

This could be the case, but it highlights the fact that some terms are restricted to use within an individual code (there are 29 in California), or even within a particular subset of a code (e.g., division , title, chapter, etc.). Here is a sampling of different definitions of “small business” found in different codes:

Government Code Section 14837 – “Small Business” means an independently owned and operated business that is not dominant in its line of business, whose head office is located in California, whose officers are domiciled in California, and that , with affiliates, has 100 or fewer employees and an average annual gross revenue of ten million dollars ($10,000,000) or less during the preceding three years, or is a manufacturer, as defined in subdivision (c ), with 100 or fewer employees. Effective January 1, 2019, the average annual gross revenue threshold will be fifteen million dollars ($15,000,000).

Health and Safety Code Section 108855 – “Small Business” means any manufacturer, importer, or distributor whose gross annual revenue from the sale of dinnerware is thirty thousand dollars ($30,000) or less.

Section 227.1 of the Streets and Highways Code – For the purposes of this section, “small business” means a for-profit business with a net worth of not more than six million dollars ($6,000,000) and after-tax profits of not more than four million dollars ($4,000,000). ).

Health and Safety Code Section 131502 – “Small Business” means an entity located in Santa Clara County that employs 50 or fewer people, with at least 35% of employees earning less than 350% of the federal poverty level for a family size of one, and which has not provided health care coverage to its employees for at least 12 consecutive months,

Government Code Section 13995.77 – “Small Business” means a business location with less than one million dollars ($1,000,000) in California gross annual revenue from all sources.

Health and Safety Code Section 40503 – “Small Business” means a business that is independently owned and operated and meets all of the following criteria:

(A) The number of employees is 10 or less.

(B) Total gross annual revenue is five hundred thousand dollars ($500,000) or less.

Section 1028.5 of the Code of Civil Procedure – “Small business” means a commercial activity that is the combination of the following:

(1) Independently owned and operated.

(2) Not dominant in its field of activity.

(3) Not exceeding the following annual gross receipts or other criteria in the categories:

(A) Agriculture, one million dollars ($1,000,000).

(B) General Construction, nine million five hundred thousand dollars ($9,500,000).

(C) Special Commercial Construction, Five Million Dollars ($5,000,000).

(D) Retail trade, two million dollars ($2,000,000).

(E) Wholesale Trade, Nine Million Five Hundred Thousand Dollars ($9,500,000).

(F) Services, two million dollars ($2,000,000).

(G) Transportation and warehousing, one million five hundred thousand dollars ($1,500,000).

(H) A manufacturing company with no more than 250 employees.

(I) A health care facility not exceeding 150 beds or one million five hundred thousand dollars ($1,500,000) in annual gross revenue.

(J) Production and transmission of electrical energy not exceeding 4,500 megawatt hours per year.

Government Code Section 12100.82 – “Small Business” means a business or non-profit organization that meets all of the following criteria, as confirmed by the tax office or agent by reviewing revenue declines, other relief funds receipts, credit history, tax returns and bank account validation:

(A) is one of the following:

(i) A sole proprietor, independent contractor, 1099 employee, C corporation, S corporation, cooperative, limited liability company, general partnership or limited partnership, with an annual gross income of less than five million dollars ($5,000,000), but greater than one thousand dollars ($1,000), in the 2019 taxation year.

(ii) A registered 501(c)(3), 501(c)(6), or 501(c)(19) nonprofit entity with annual gross revenue of less than five million dollars ($5,000,000 ), but greater than one thousand dollars ($1,000), in the 2019 taxation year.

(iii) A division or department of a larger organization or entity, such as a tribal government, city, county, or city and county.

(iv) An organization financially sponsored by a not-for-profit corporation.

(B) Began operating in the state before June 1, 2019.

(C) Is currently active and operational, or has a clear plan to reopen when the state allows the business to reopen.

(D) Has been impacted by COVID-19 and related health and safety restrictions, such as business interruptions or business closures due to the COVID-19 pandemic.

(E) Provides organizational documents, such as a 2019 tax return or Form 990, affidavit from the board of directors or an authorized officer of governmental authority, detailing the governance structure; or a copy of an official filing with the secretary of state or local municipality, as applicable, including but not limited to articles of incorporation, certificate of organization, fictitious name of registration or the business license issued by the government.

(F) Provides an acceptable form of government-issued photo identification, if applicable.

Revenue and Tax Code Section 17941 – “Small Business” means a limited liability company whose total income from all sources arising from or attributable to the state is two hundred and fifty thousand dollars ($250,000) or less.

Government Code Section 53398. 52 – “Small Business” means an independently owned and operated business that is not dominant in its field of activity, headquartered in California, whose officers are domiciled in California and who, together with affiliates, has 100 or fewer employees and average annual gross revenues of fifteen million dollars ($15,000,000) or less during the preceding three years, or is a Manufacturer, as defined in sub- division (c) of section 14837, with 100 or fewer employees.

Government Code Section 11346.3 – “Small Business” means a business that meets all of the following criteria:

(i) Independently Owned and Operated.

(ii) Not dominant in its field of activity.

(iii) Has less than 100 employees.

Government Code Section 12100 – “Small Business” means a business with less than 100 employees and gross revenue of less than five million dollars ($5,000,000)

Income Tax Code Section 23153 – “Small business” means a corporation whose total income from all sources arising from or attributable to the state is two hundred and fifty thousand dollars ($250,000) or less .

Health and Safety Code Section 23395.20 – “Small Business” means an independently owned and operated business, which is not dominant in its field of activity, which, together with affiliated companies, has 100 employees or less and which has average annual gross receipts of ten million dollars ($10,000,000) or less over the preceding three years, or a business which is a manufacturer, as defined in Section 14837 of the Government Code, with 100 employees or less.

Revenue and Tax Code Section 24416 – “Qualifying Small Business” means any business or enterprise that has gross receipts, less returns and allowances, of less than one million dollars ($1,000,000) during the year of income.

Income Tax Code Section 17053.73 – “Small business” means a trade or business that has total gross receipts, less returns and allowances reportable to that state, of less than two million dollars (2,000,000 $) in the previous tax year.

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