Thinking About Buying a Business? The SBA Just Changed the Rules

New SBA business-acquisition rules took effect October 1, 2026. If buying an existing business is part of your entrepreneurial plan, here’s what changed—and what you should know before making an offer.

Starting a business from scratch isn’t the only way to become a business owner.

Every day, established businesses with customers, employees, equipment, revenue and years of operating history are put up for sale. And as more longtime business owners approach retirement, buying an existing company could become an increasingly important path into entrepreneurship.

But there’s another part of the equation:

How do you pay for it?

For many buyers, an SBA-backed loan is one possible answer.

On October 1, 2026, the U.S. Small Business Administration’s SOP 50 10 8.1 took effect, including a new Appendix 15 dedicated specifically to 7(a) change-of-ownership transactions.

If you’re considering buying a business, expanding by acquiring another company or buying out an existing owner, the new framework is worth understanding before you structure the deal.

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At a Glance

The SBA hasn’t made business acquisitions impossible. It has created a more defined framework for evaluating and financing them.

What’s Important	What It Could Mean for a Buyer
Four defined acquisition categories	Requirements depend partly on the type of ownership transaction
10% equity requirement for an Initial Acquisition	A typical outside buyer generally needs meaningful equity in the transaction
Historical cash flow matters	Future growth projections generally can’t rescue an acquisition that fails the required historical debt-service test
Business valuation requirements	The asking price and supported business value may not be the same
Quality of Earnings review for certain $3M+ purchases	Larger Initial Acquisitions and Business Expansions can face substantially more financial due diligence
7(a) Small and SBA Express remain available	The September technical update expressly permits them for qualifying change-of-ownership transactions, subject to Appendix 15

The bigger takeaway: Don’t find a business, negotiate the entire deal and only then ask whether SBA financing works.

Understanding the financing structure earlier could prevent an expensive surprise later.

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Why Buying a Business Is Becoming a Bigger Entrepreneurial Opportunity

We recently discussed the ownership transition facing many established small businesses.

Owners retire. Families decide not to take over. Partners want out. Some entrepreneurs simply decide they’ve built enough and are ready for their next chapter.

That creates a problem for one entrepreneur—and an opportunity for another.

Instead of spending years trying to create customers, revenue, processes and brand recognition from zero, a buyer may be able to acquire a company that already has them.

Imagine buying a local service company with:

• 12 employees
• recurring customers
• $1.5 million in annual revenue
• equipment already in place
• an established reputation
• an owner ready to retire

You’re not buying an idea.

You’re buying an operating business.

But you’re also buying its risks, financial history, obligations and future cash flow.

That’s one reason the SBA’s new framework puts considerable emphasis on whether the business itself can financially support the acquisition.

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What Exactly Changed?

Appendix 15 organizes 7(a) change-of-ownership transactions into four categories:

Initial Acquisition

Generally, an outside buyer becomes the new majority or largest individual owner of an existing business.

Business Expansion

An existing qualifying business acquires another business as part of its expansion.

Owner Buyout

Existing owners or certain long-term employees acquire ownership interests in the business.

ESOP and Cooperative Transactions

Ownership transfers involving qualifying employee stock ownership plans or cooperatives.

Why does this matter?

Because the category can affect the required equity injection, debt-service coverage and financial due diligence applied to the transaction.

For many entrepreneurs searching for an established company to purchase, Initial Acquisition will be the category that matters most.

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How Much Money Will You Need to Put Into the Deal?

For an Initial Acquisition, SOP 50 10 8.1 requires an equity injection of at least:

10% of the total project cost.

For an Initial Acquisition, that minimum cannot be reduced or eliminated.

There’s an important distinction here.

The calculation isn’t necessarily based only on the advertised purchase price.

Suppose you purchase a company for:

Business purchase price: $1,000,000

But the financing request also includes:

Closing costs: $30,000
Working capital: $50,000

The total project cost in this simplified example becomes:

$1,080,000

A 10% equity injection would therefore be:

$108,000

—not $100,000.

Seller debt on full standby may potentially count toward part of the required equity injection, subject to SBA requirements and limits. Under the new framework, limited sources such as qualifying standby debt generally cannot account for more than half of the required injection.

That means buyers shouldn’t assume they can purchase a company with little or none of their own capital.

Pro Tip

Determine your realistic acquisition budget before shopping for businesses.

A $1 million business doesn’t necessarily mean a $1 million financing project once working capital, fees and other eligible costs are included.

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The Business Has to Support the Debt

Here’s where the new framework becomes particularly important.

Buying a great company at the wrong price can still be a bad deal.

For an Initial Acquisition, the SBA framework generally requires a minimum 1.25-to-1 debt-service coverage ratio, calculated using historical or permitted adjusted historical earnings.

In plain English:

Can this business generate enough cash to service the acquisition debt and continue operating?

A 1.25 coverage ratio essentially means the applicable earnings measure needs to provide $1.25 for every $1.00 of required debt service.

That’s a much different question from:

“Could this business make more money after I buy it?”

You may have brilliant plans.

You may see marketing opportunities the current owner missed.

You might introduce AI, e-commerce, new services, better advertising or improved operations.

Those plans may make the acquisition more attractive to you.

But for the required historical coverage test, future projections generally cannot substitute for a business that doesn’t demonstrate adequate historical performance, subject to limited exceptions in the SBA rules.

That’s a major distinction for prospective buyers.

Potential matters. But the numbers the business has already produced matter too.

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A $3 Million Purchase Can Trigger Much More Scrutiny

One particularly notable change affects larger acquisitions.

For an Initial Acquisition or Business Expansion where the Business Purchase Price is $3 million or more, the lender generally must obtain an independent Quality of Earnings (QoE) analysis that includes a Cash Proof.

Importantly, this threshold is tied to the applicable Business Purchase Price, not simply the amount of the SBA loan.

Think of a QoE as a deeper examination of the financial story the business is telling.

A buyer might see:

Revenue: $5 million
Reported earnings: $750,000

But the more important questions are:

• How much of those earnings are sustainable?
• Are unusual expenses being removed to make earnings appear stronger?
• Does actual cash activity support the reported results?
• Are seller adjustments reasonable?
• Are there revenue or customer risks hidden beneath the headline numbers?
• Will those earnings remain after ownership changes?

The SBA-required QoE must satisfy specific independence and lender requirements; a report commissioned by the seller or buyer does not automatically satisfy the SBA requirement.

For a buyer, that additional scrutiny shouldn’t necessarily be viewed as an obstacle.

It may uncover something you’d rather know before you own the company.

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The Asking Price Isn’t Automatically the Business Value

This distinction becomes critical when buying an existing business.

A seller can ask:

$2 million.

That doesn’t automatically mean the company supports a $2 million valuation for purposes of the SBA-financed transaction.

Business valuation requirements apply to change-of-ownership transactions, and the financing structure has to work within those requirements.

For certain smaller transactions, the updated SBA guidance permits a lender’s internal valuation when the Business Purchase Price is $350,000 or less and applicable conditions are met. Other transactions can require an independent valuation from a qualified source.

The important point for a buyer is simpler:

The seller’s asking price isn’t the final word on value.

If the supported value doesn’t justify the proposed transaction, the solution might require:

• a lower purchase price,
• additional buyer equity,
• appropriately structured seller financing,
• or a different transaction structure.

Pro Tip

Don’t fall in love with the business before you understand the numbers.

You’re not just buying its revenue.

You’re buying its ability to produce sustainable cash flow after the previous owner leaves.

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Buying a Business Is Different From Starting One

This is where the opportunity gets interesting.

Imagine two entrepreneurs each have $150,000 available.

Entrepreneur A starts from scratch.

That money may need to fund:

• business formation
• equipment
• inventory
• marketing
• payroll
• rent
• technology
• insurance
• customer acquisition

And revenue may take months—or years—to develop.

Entrepreneur B acquires an existing company.

That business might already have:

• customers
• employees
• suppliers
• systems
• equipment
• cash flow
• brand recognition

Neither approach is automatically better.

But they’re fundamentally different entrepreneurial strategies.

And for some future business owners, buying instead of building may deserve serious consideration.

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Don’t Forget the Business Entity

Buying a business also creates legal and organizational decisions beyond financing.

A buyer may need to determine whether the transaction will be structured as an asset purchase or an equity/ownership purchase, and whether a new LLC or corporation should be created to acquire and operate the business.

The structure can affect issues including:

• liabilities
• contracts
• licenses
• employees
• taxes
• intellectual property
• permits
• financing
• future ownership

This is an area where an attorney, accountant and lender should be involved before the transaction is finalized.

And if the acquisition requires forming a new LLC or corporation, obtaining an EIN, registering in another state or securing Registered Agent service, those steps can be addressed as part of the acquisition planning process.

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What Should You Do Before Making an Offer?

If you’re seriously considering purchasing a business with SBA-backed financing, don’t make financing the last step.

Before signing a purchase agreement, understand:

1. Which SBA acquisition category applies to the transaction.
2. How much equity you’ll realistically need.
3. Whether the company’s historical cash flow supports the proposed debt.
4. Whether the asking price can be supported by an appropriate business valuation.
5. Whether additional financial diligence, including a Quality of Earnings analysis, will apply.
6. How the acquisition entity and purchase should be structured.
7. What happens if financing isn’t approved.

Your purchase agreement should also be reviewed by qualified legal and financial professionals and contain appropriate protections for the transaction.

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Frequently Asked Questions

Can I use an SBA 7(a) loan to buy an existing business?

Yes. SBA 7(a) financing can be used for qualifying change-of-ownership transactions, subject to SBA eligibility requirements, lender underwriting and the requirements applicable to the specific transaction.

Did SBA business-acquisition rules change in October 2026?

Yes. SOP 50 10 8.1 became effective October 1, 2026, and Appendix 15 provides a dedicated framework for 7(a) change-of-ownership transactions.

Do I need 10% down to buy a business with an SBA loan?

For an Initial Acquisition, the SBA requires an equity injection of at least 10% of total project cost, and that minimum cannot be reduced or eliminated. Rules also govern what sources may count toward the required injection.

Can the seller help finance the purchase?

Potentially. Seller financing can be part of an acquisition structure. A seller note that is intended to count toward the required equity injection must meet SBA requirements, including applicable standby and source limitations.

Does SBA determine what a business is worth?

SBA change-of-ownership financing includes business valuation requirements. The lender must ensure the transaction complies with those requirements. A seller’s asking price by itself doesn’t establish the supported value of the business.

What happens when the Business Purchase Price is $3 million or more?

For qualifying Initial Acquisition and Business Expansion transactions with a Business Purchase Price of $3 million or more, the lender generally must obtain an independent Quality of Earnings analysis that includes a Cash Proof.

Can 7(a) Small or SBA Express financing be used to buy a business?

Under the SBA’s September 2026 technical update to SOP 50 10 8.1, 7(a) Small and SBA Express loans may be used for qualifying change-of-ownership transactions, subject to the requirements of Appendix 15.

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What This Means for Future Business Owners

For decades, the entrepreneurial dream has often been described the same way:

Come up with an idea. Start a company. Build it.

But there’s another route.

Find something someone else spent 20 or 30 years building—and become the person who takes it forward.

Many established businesses will eventually need new owners. Some may close because nobody steps forward. Others will be acquired by competitors, employees, family members or entrepreneurs who recognize an opportunity.

The SBA’s new framework doesn’t make buying a business effortless.

It reinforces something every prospective buyer should understand:

An acquisition needs to work financially—not simply look attractive in a listing.

So before asking:

“What business should I start?”

It may be worth asking another question:

“What business could I buy?”

For the right entrepreneur, that could be an entirely different path to business ownership.

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Official Resource:
U.S. Small Business Administration — SOP 50 10, Lender and Development Company Loan Programs
SOP 50 10 8.1 and the updated Appendix 15 became effective October 1, 2026.

The IRS Is Reexamining Pandemic Business Loans. What Should Small Business

New IRS examinations involving approximately $100 billion in pandemic-era loans raise questions about tax reporting, outstanding SBA debt, and the financial records business owners should still have.

The pandemic may be behind us, but the financial decisions businesses made during that period are still receiving attention from federal authorities.

On September 23, 2026, the U.S. Small Business Administration (SBA) announced that the Internal Revenue Service (IRS) had opened examinations following the identification of discrepancies associated with approximately $100 billion in pandemic-era business loans.

The announcement is the latest development in a multiyear effort to investigate potential fraud involving the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (EIDL) program.

For small-business owners who received assistance during the pandemic, the announcement raises an important question: Could a loan application submitted five or six years ago create financial or tax problems today?

The answer depends on the circumstances.

The $100 billion figure represents loans associated with identified discrepancies, not $100 billion in confirmed fraud or unpaid taxes. Nor does the announcement mean that every business that received pandemic assistance is being audited.

Nevertheless, it is a timely reminder that business owners should understand their remaining loan obligations, preserve important financial records, and know what to do if the IRS or SBA requests additional information.

Here is how the story developed, what has changed, and what business owners should consider today.

At a Glance: What Business Owners Need to Know

Key question	What it means for your business
What happened?	The IRS opened examinations following a review of discrepancies associated with approximately $100 billion in pandemic-era loans.
Is this a new investigation?	It is a new development in an enforcement effort that began during the pandemic.
Are all PPP and EIDL borrowers being audited?	No blanket audit of all borrowers was announced.
Does a discrepancy mean fraud?	No. Differences in reported information require examination before conclusions can be reached.
Is PPP forgiveness now taxable?	No. Qualifying PPP loan forgiveness remains generally excluded from federal gross income.
What should owners do?	Review loan applications, tax returns, forgiveness records, outstanding balances, and supporting documentation.

How We Got Here: A Quick Timeline of Pandemic Business Loan Oversight

The September 2026 announcement did not come out of nowhere. Federal authorities have been investigating pandemic-relief fraud for years.

2020–2021: Emergency funding reaches small businesses

The federal government launches PPP and expands EIDL assistance to help businesses survive the economic disruption caused by COVID-19.

PPP provides potentially forgivable loans for eligible payroll and other business expenses. COVID EIDL provides longer-term financing to help eligible businesses meet financial obligations and operating expenses.

The programs distribute substantial funding to businesses facing unprecedented economic uncertainty.

2022–2023: Investigators identify widespread potential fraud

Federal authorities continue reviewing suspicious applications, duplicate funding requests, and other potential misuse of pandemic assistance.

In June 2023, the SBA Office of Inspector General estimates that more than $200 billion in pandemic-relief assistance was potentially fraudulent.

The estimate identifies suspected fraud, not a final determination that every dollar was improperly obtained.

2024–2025: Investigations and recovery efforts continue

Federal authorities continue pursuing cases involving allegedly fraudulent applications, false financial information, and improper use of pandemic assistance.

Meanwhile, businesses with outstanding COVID EIDL loans remain responsible for meeting their repayment and servicing obligations.

September 23, 2026: The IRS announces a new phase of examinations

The SBA announces that it referred more than $200 billion in suspected pandemic-relief fraud to the IRS earlier in 2026.

The IRS compares information provided in loan applications with information reported on federal tax returns.

That comparison identifies discrepancies associated with approximately $100 billion in loans, prompting IRS examinations to determine whether additional taxes or penalties apply.

The significance of this latest development is not simply that federal authorities are continuing to investigate pandemic-relief fraud.

It is that information businesses provided when applying for assistance is being compared with their federal tax reporting to identify potential discrepancies.

That distinction brings the issue directly into the financial records of businesses that received pandemic assistance.

What Should Concern Business Owners Today?

For legitimate business owners, the latest announcement is not a reason to panic. It is a reason to revisit financial records that may not have received much attention since the pandemic.

There are five areas worth examining.

1. Do Your Original Loan Applications Match Your Financial Records?

When businesses applied for PPP or COVID EIDL assistance, they provided information about payroll, revenue, business operations, and other eligibility requirements.

The September 23 announcement specifically identifies comparisons between information supplied to the SBA and information reported to the IRS.

Consider a business that reported $400,000 in revenue on a pandemic-relief application but reported $250,000 on its federal tax return.

Does that difference automatically indicate fraud?

No.

The application and tax return may have covered different reporting periods. The business may have used a different accounting method, filed an amended return, or made an error that requires clarification.

PPP and EIDL applications also had different eligibility and financial-reporting requirements. Figures reported for one program should not automatically be expected to match those reported for another.

However, a significant unexplained difference could warrant additional examination.

What business owners should do: Locate your original loan applications and compare the reported figures with the relevant tax returns, payroll records, financial statements, and bank deposits.

If something does not reconcile, ask your accountant to investigate the difference before assuming that either document was incorrect.

Do not alter historical records to make the numbers match. If a material error is discovered, obtain professional guidance about the appropriate next steps.

2. Was Your PPP Loan Forgiveness Properly Documented?

PPP was designed to provide forgivable assistance when borrowers satisfied the program’s applicable requirements.

Businesses generally needed to document eligible expenses and meet the relevant forgiveness rules.

Although a loan may have been forgiven years ago, the supporting documentation can remain important if questions arise about eligibility, reported payroll expenses, or the use of funds.

There is also an important tax distinction.

Under federal law, qualifying PPP loan forgiveness generally creates tax-exempt income. Businesses can also generally deduct otherwise deductible eligible expenses paid with forgiven PPP funds, subject to applicable requirements.

The September announcement does not change the federal tax treatment of legitimate PPP forgiveness.

However, a business that obtained funds through false representations or improperly claimed forgiveness could face different legal and tax questions.

What business owners should do: Confirm that you can locate your PPP forgiveness application, forgiveness determination, payroll records, and documentation supporting the expenses used to obtain forgiveness.

If your business also claimed the Employee Retention Credit (ERC), review whether the same wages were improperly used to support both PPP forgiveness and the ERC.

The IRS prohibits claiming the ERC on wages used to obtain PPP forgiveness, subject to the applicable wage-allocation rules. A business may still qualify for the ERC on other eligible wages.

3. Do You Still Have an Outstanding COVID EIDL Loan?

This is an important distinction that can easily get lost in discussions about pandemic-relief funding.

PPP and COVID EIDL were different programs.

PPP loans could qualify for forgiveness. COVID EIDL loans generally created repayment obligations, even when the business experienced significant financial difficulties.

For business owners who still have an outstanding COVID EIDL balance, those obligations did not disappear when the pandemic ended.

The SBA continues to provide loan servicing, repayment information, and payment assistance for eligible borrowers.

What business owners should do: Review your current loan balance, payment history, interest, and repayment schedule.

If your business is experiencing financial difficulties, contact the SBA before allowing the loan to become seriously delinquent.

The SBA’s current payment-assistance program is designed for eligible borrowers experiencing temporary financial difficulties. Among other requirements, the business must be actively operating, the loan must meet the SBA’s payment-status requirements, and the borrower and owners must not be subject to active bankruptcy proceedings.

Approved assistance temporarily reduces payments. It does not eliminate the underlying debt, and interest continues to accrue.

Business owner tip: If you have an outstanding COVID EIDL loan, review your account through the official SBA Loan Portal:

https://lending.sba.gov

Verify your current balance, payment status, and any notices from the SBA. Do not assume that closing a business or stopping operations automatically eliminates the loan.

4. What If Your Accountant or Another Party Prepared the Original Application?

During the pandemic, many small-business owners relied on accountants, payroll providers, lenders, or third-party consultants to prepare relief applications.

Some owners may not have personally entered every figure submitted to the SBA.

However, using a third party does not automatically eliminate a borrower’s responsibility for representations made in a loan application.

If an application contains inaccurate information, the relevant facts—including who prepared it, what information was supplied, and what the borrower knew—may matter.

What business owners should do: Retrieve the complete application package, including supporting documents and communications with the person or company that prepared it.

If you discover a material error, consult a qualified tax professional or attorney before making corrections or contacting federal authorities.

An innocent bookkeeping discrepancy and a knowingly false application are not the same thing. The appropriate response depends on the circumstances.

5. Are You Planning to Sell Your Business or Purchase an Established Company?

This is an area that deserves particular attention as more business owners consider retirement, ownership transitions, or selling their companies.

A business that received pandemic assistance may still have outstanding loan obligations, collateral arrangements, or unresolved compliance issues.

For example, imagine purchasing an established company only to discover that it has an outstanding COVID EIDL loan secured by business assets.

Depending on the transaction structure and loan documents, the existing debt and collateral arrangements could affect the purchase, financing, or transfer of assets.

The SBA has specific procedures for COVID EIDL servicing actions, including requests involving changes in ownership, loan assumptions, releases of collateral, and releases of guarantors.

Before buying an established business, prospective purchasers should consider reviewing:

• Outstanding PPP or EIDL obligations and the associated loan documents.
• Any SBA liens, collateral agreements, or personal guarantees.
• PPP forgiveness determinations and relevant financial records.
• Notices of pending audits, examinations, repayment disputes, or other unresolved matters.
• Whether the proposed transaction requires SBA approval or a loan servicing action.

A business acquisition attorney and qualified accountant can help determine which obligations may remain with the seller, which could affect the buyer, and what protections should be included in the purchase agreement.

A buyer does not automatically assume every liability of the seller. The outcome depends on the transaction structure, applicable law, loan agreements, and other relevant circumstances.

The key takeaway: Buying an established business means examining its financial history, not just its current revenue, profitability, and customer base.

How Long Should Business Owners Keep Their Pandemic Loan Records?

One common mistake is assuming that financial records can be discarded once a loan has been forgiven or a tax return is several years old.

Record-retention requirements depend on the type of record, the applicable program, and the circumstances.

For federal income tax purposes, the IRS generally has three years to assess additional tax, but certain situations involve longer periods. For example, substantial omissions of income can trigger a six-year assessment period, while fraudulent returns may be assessed without a time limit.

Loan agreements, forgiveness requirements, and other applicable rules may also require records to be retained longer than the ordinary tax period.

For business owners who received pandemic assistance, it is sensible to preserve the complete loan file and supporting financial documentation until the applicable retention periods have expired and any outstanding examinations or disputes have been resolved.

If you are uncertain whether records can be discarded, consult your accountant or attorney first.

What If You Receive a Letter From the IRS?

Receiving an IRS notice does not automatically mean that your business has committed fraud.

An examination may involve a request for documents, clarification of reported figures, or an explanation of a particular transaction.

The IRS generally provides written instructions identifying the information it needs and the applicable response deadline.

If you receive a notice concerning pandemic-relief assistance, take the following steps:

1. Verify the notice.

Confirm that the correspondence is legitimate. Use the official IRS website or independently verified contact information rather than relying on unexpected emails, text messages, or payment requests.

2. Identify the issue and response deadline.

Determine whether the IRS is requesting documentation, proposing an adjustment, or initiating an examination. Do not ignore the deadline.

3. Gather the relevant financial records.

Collect the original loan application, applicable tax returns, payroll information, bank statements, and supporting documentation.

4. Seek professional guidance.

A qualified CPA, enrolled agent, or tax attorney can help evaluate the issue and determine an appropriate response. If fraud allegations or potential criminal exposure are involved, consult an attorney experienced in tax controversies.

5. Respond accurately and preserve your records.

Provide the requested information through the appropriate channels. Retain copies of correspondence and proof of submission.

For additional guidance, visit the IRS resource on understanding an IRS notice or letter:

https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter

Frequently Asked Questions

Is the IRS auditing every business that received a PPP or EIDL loan?

No. The September 23 announcement describes examinations arising from identified discrepancies. It does not announce a blanket audit of all pandemic-relief borrowers.

Will my forgiven PPP loan now become taxable?

Qualifying PPP loan forgiveness remains generally excluded from federal gross income. The new announcement does not change that treatment. However, improperly obtained assistance or inaccurate tax reporting can create separate issues.

Can the IRS investigate a pandemic loan from 2020 or 2021?

Potentially. The applicable assessment period depends on the tax year, the type of issue, and the relevant legal provisions. A business should not assume that all pandemic-era tax matters are closed simply because several years have passed.

What if my business has closed but I still owe an EIDL loan?

Closing a business does not automatically eliminate its loan obligations. The SBA provides specific servicing procedures for anticipated business closures and liquidation. Borrowers should contact the SBA to understand their obligations and available options.

Should I amend an old tax return if I discover an error in my loan application?

Not automatically. A loan application error does not necessarily mean the tax return is incorrect. Have a qualified tax professional review the underlying records and determine whether any correction is appropriate.

Final Thoughts: The Pandemic Is Over, but Your Business Records Still Matter

For many small-business owners, PPP and EIDL assistance provided a financial lifeline during one of the most difficult periods in recent business history.

Years later, those programs remain part of the financial history of thousands of companies.

The September 23 announcement is a reminder that information submitted during the pandemic can still be relevant to federal tax examinations and loan compliance.

But there is an important difference between a legitimate business that received assistance and a borrower who knowingly submitted false information to obtain funds.

Business owners should not interpret the announcement as evidence that every pandemic-relief borrower faces renewed scrutiny.

Instead, use it as an opportunity to review your records, resolve outstanding loan obligations, and ensure that your financial documentation accurately reflects your business activities.

If you are preparing to sell your business, purchase an established company, or transition ownership to a family member, pandemic-era financing should also be part of your financial and legal review.

The bottom line: You cannot change the financial decisions your business made during the pandemic, but you can make sure you understand them, have the documentation to explain them, and address any unresolved obligations before they become larger problems.

Official Government Resources

For business owners who want to review the latest developments or check their pandemic-era loan obligations, the following government resources provide additional information.

1. SBA: Pandemic-Relief Fraud and Enforcement Updates

Review official SBA announcements and developments involving PPP and COVID EIDL investigations.

https://www.sba.gov/about-sba/sba-newsroom

2. SBA: COVID-19 Economic Injury Disaster Loan

Information about COVID EIDL repayment, loan servicing, outstanding balances, and borrower obligations.

https://www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan

3. SBA Loan Portal

Access your SBA loan account to review balances, payment information, and available servicing options.

https://lending.sba.gov

4. IRS: How Long Should I Keep Records?

Official IRS guidance explaining federal tax record-retention requirements and circumstances that may require businesses to preserve records for longer periods.

https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

5. IRS: Understanding Your IRS Notice or Letter

Guidance for business owners who receive correspondence requesting additional information or notifying them of an examination.

https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter

Your Next Customer May Not Live in America, Is Your Small Business Ready to Sell Overseas?

How American entrepreneurs can use technology, overcome international business barriers, and discover new opportunities for growth beyond U.S. borders.

Imagine opening your business email tomorrow morning and finding an inquiry from a potential customer in Germany. They discovered your website, like what you offer, and want to place an order.

There’s just one problem: You’ve never sold anything outside the United States.

Can you accept their payment? Will your product meet their country’s requirements? How much will shipping cost? What happens if they want to return it?

Or perhaps you operate a consulting business, and a company in Canada wants to hire you. There’s no physical product to ship, but you’ll still need to consider contracts, payment arrangements, currency conversion, and potentially foreign tax requirements.

For many American small businesses, international expansion sounds like something reserved for large corporations with overseas offices, global supply chains, and dedicated legal departments.

But selling internationally doesn’t necessarily require any of those things.

An American entrepreneur can potentially reach overseas customers through an existing website, an online marketplace, or a digital service. Modern technology can make communication, payments, and international transactions more accessible to businesses of all sizes.

The opportunity is worth exploring. However, reaching an international customer and successfully serving that customer are two very different things.

Before your small business begins selling overseas, you need to understand where the opportunities exist, what challenges you may encounter, and how to determine whether international growth makes financial sense.

This guide explores the fundamentals of international selling and introduces three areas every entrepreneur should consider: technology and language, business operations and compliance, and international market growth.

At a Glance: What Does It Take to Sell Internationally?

Selling internationally can mean shipping a product to a customer in another country, providing professional services to an overseas company, or delivering digital products through an online platform.

The requirements vary depending on your business, the country you’re selling to, and the type of product or service you provide.

Area	What your business needs to consider
International demand	Are customers in other countries looking for what you sell?
Technology and language	Can overseas customers find, understand, and use your website?
Payments	Can you accept international payments and manage currency conversion?
Shipping and delivery	Can you deliver your product or service reliably and profitably?
Taxes and compliance	What U.S. and foreign requirements apply to your transactions?
Growth strategy	Can you test international demand before making a major investment?

The U.S. Small Business Administration provides resources to help entrepreneurs evaluate these questions, including export planning, market research, financing, and international trade requirements.

1. You May Already Have International Customers Looking for You

Before spending money on international advertising or creating a foreign-language website, consider something much simpler.

Look at where your existing customers and website visitors are coming from.

An American business might discover that people in Canada are regularly visiting its product pages. A software company might receive inquiries from businesses in the United Kingdom. A consultant might find that an article published months ago is attracting visitors from Australia.

These visitors aren’t necessarily customers yet. However, they may provide early clues about where international demand exists.

If your business has an established website, begin by reviewing:

• Website traffic by country and the pages international visitors view most frequently.
• Overseas inquiries, abandoned shopping carts, and attempted international orders.
• Search terms that bring visitors from outside the United States.
• Existing customers who have foreign billing addresses or international business operations.

For example, imagine an American company selling specialty woodworking tools. Its website receives consistent traffic from Canadian visitors, and several customers have asked whether the company ships to Ontario.

Rather than immediately launching a global advertising campaign, the owner could investigate whether serving Canadian customers is commercially viable.

That might involve researching shipping costs, applicable Canadian import requirements, competing products, customer demand, and the final price a Canadian buyer would pay.

If the numbers work, Canada could become a potential test market.

The important distinction is that international website traffic is an indication of interest, not proof of profitable demand.

Small Business Takeaway

Your first international growth opportunity may already be visible in your website analytics, customer inquiries, or existing sales records. Look for evidence of demand before investing in expansion.

2. Technology Is Making International Selling More Accessible

A generation ago, reaching overseas customers often required international distributors, extensive business travel, or substantial investment in foreign sales operations.

Today, an American business can potentially reach international customers through its existing website, online marketplaces, digital advertising, and virtual communication.

Technology doesn’t eliminate the challenges of international business, but it can reduce some of the barriers to finding and serving customers.

Consider a small American business selling handmade home décor.

Its owner could use an e-commerce platform to display products to international shoppers, translation tools to make descriptions understandable, and a payment provider that supports transactions from customers in selected foreign markets.

Shipping software may also help calculate delivery costs and prepare necessary documentation.

For a service-based company, the process could be even more straightforward. A graphic designer or business consultant may be able to communicate with overseas clients, deliver completed work electronically, and receive payment without shipping a physical product.

However, technology alone doesn’t make a business ready to sell internationally.

A website that accepts international orders still needs to provide accurate product information, comply with applicable regulations, and communicate realistic delivery expectations.

The U.S. International Trade Administration identifies website performance, search visibility, translation capabilities, and localized customer experiences as important elements of international e-commerce.

Language Is Only Part of the Challenge

Imagine finding a product on a foreign website. The description has been translated into English, but the price is displayed in an unfamiliar currency, the measurements use a different system, and the shipping information doesn’t explain whether delivery to the United States is available.

You might understand the product perfectly and still decide not to purchase it.

Your international customers can encounter the same problem.

Preparing a website for overseas customers may involve more than translating a few pages. Depending on the market, businesses may need to address local currencies, measurement systems, payment preferences, customer support, and culturally appropriate product descriptions.

AI-powered translation can help businesses prepare multilingual content, but important product specifications, contractual terms, and legally required information may need professional review.

The objective isn’t simply to make your website readable in another language. It’s to make the entire purchasing experience understandable, trustworthy, and practical for the customer.

In our next article, we’ll explore how small businesses can use AI, multilingual websites, international SEO, and e-commerce technology to reach overseas customers without unnecessarily rebuilding their entire digital presence.

3. Selling Overseas Is One Thing. Delivering Profitably Is Another.

Let’s return to our woodworking business.

The owner receives an order from a customer in Canada. The customer is willing to pay $150 for a specialty tool.

At first glance, that’s a successful sale.

But the business still needs to account for shipping, packaging, payment processing, currency conversion, any applicable duties and taxes it has agreed to cover, and the possibility of a return.

A profitable domestic transaction may become considerably less attractive when these additional costs are included.

The challenge is different for a service-based company, but it doesn’t disappear.

A U.S. consultant working with an overseas client may need to address payment terms, foreign exchange fees, contract enforcement, intellectual property, and applicable tax obligations.

The U.S. Commercial Service advises exporters to consider payment risk, foreign regulations, product standards, and shipping requirements as part of preparing for international sales.

Understand the Full Cost of an International Sale

Consider the following hypothetical transaction.

Illustrative example · Physical product

A $150 international order

Assume the seller has agreed to cover the listed shipping and import-related expenses.

Customer payment	$150.00
Product cost	−$55.00
International shipping and packaging	−$28.00
Payment and conversion fees	−$7.00
Seller-paid import charges	−$15.00
Other allocated operating expenses	−$20.00
Estimated profit before income taxes	$25.00

Illustrative amounts only. Actual costs, taxes, duties, and payment responsibilities depend on the product, destination, shipping terms, and transaction.

The business generated $150 in revenue, but its estimated profit was only $25.

That may still be an acceptable transaction. However, the owner needs to understand the actual economics before deciding whether to pursue additional international sales.

What About International Taxes and Regulations?

Selling internationally can introduce obligations that don’t arise in an ordinary domestic transaction.

Depending on the product, service, destination, and transaction structure, a business may need to consider:

• U.S. export controls and licensing requirements.
• Foreign product standards and import restrictions.
• Customs documentation, tariffs, and import duties.
• Value-added tax (VAT), goods and services tax (GST), or other applicable foreign taxes.
• Consumer protection, privacy, and contractual requirements.

These obligations vary by country and type of business. They should be researched before accepting orders in a new market.

The International Trade Administration provides country-specific information about customs requirements, product standards, and trade regulations.

Do You Need to Form a Company in Another Country?

Not necessarily.

A U.S. business may be able to sell products or provide services to foreign customers without establishing a separate legal entity overseas.

However, selling across borders and operating a business within another country are not always treated the same way.

Establishing a foreign office, hiring employees abroad, maintaining inventory in another country, or conducting certain regulated activities may create additional registration, tax, or licensing obligations.

The applicable requirements depend on the destination country’s laws and the business’s actual activities.

For entrepreneurs considering international growth, having an appropriately organized U.S. business, accurate financial records, and clear contractual arrangements provides a useful starting point.

MyUSACorporation can help entrepreneurs establish and maintain their U.S. business structure through services such as LLC formation , incorporation , and EIN applications .

However, forming a U.S. LLC or corporation does not automatically satisfy foreign business registration, tax, or licensing requirements.

In our upcoming international business operations guide, we’ll examine the financial and regulatory considerations in greater detail, including how businesses can evaluate payment methods, shipping arrangements, and the true cost of serving overseas customers.

4. The World Is a Big Market. Where Should Your Business Start?

One of the biggest mistakes a small business could make is assuming that international expansion means trying to sell everywhere at once.

Different countries have different customer preferences, competitive conditions, payment systems, regulations, and delivery costs.

A product that sells successfully in the United States may encounter limited demand in another country. A service that attracts customers in one market may require significant changes to succeed elsewhere.

Rather than attempting to reach the entire world, consider starting with one market where your business has evidence of potential demand.

Choosing Your First International Market

Let’s imagine a U.S. company that sells specialized outdoor equipment.

The owner has noticed visitors from Canada, Germany, and Australia.

All three countries could represent potential opportunities, but the business needs more information before deciding where to begin.

Research question	Why it matters
Is there measurable demand?	Identifies whether customers are actively seeking the product.
What does the competition look like?	Helps evaluate pricing and market positioning.
How much will delivery cost?	Determines whether the business can maintain acceptable margins.
Are there language barriers?	Identifies potential translation and customer service needs.
What regulations apply?	Helps determine the cost and complexity of entering the market.
Can the business support customers?	Evaluates communication, returns, and operational capacity.

The answers may reveal that one market is easier to test than another.

For example, Canada may offer practical advantages for some American businesses because of geographic proximity and shared language in many regions. However, Canadian import requirements, taxes, product regulations, and French-language obligations in certain circumstances still need to be considered.

For other businesses, a different country may offer stronger demand or a more suitable customer base.

The right starting point depends on what the business sells and its ability to serve that market.

The SBA offers market research resources and connections to U.S. Export Assistance Centers that can help small businesses evaluate potential overseas opportunities.

Start Small, Measure Results, and Expand Carefully

An international growth strategy doesn’t have to begin with a major investment.

A small business could begin by researching a single market, evaluating a limited product offering, and testing whether it can generate profitable sales.

The owner might start by accepting a small number of international orders or offering a specific service to customers in one country.

The results can help answer important questions.

Are customers willing to pay the final price? Can the business deliver reliably? Are communication and support manageable? Does the revenue justify the additional operational costs?

If the initial test produces encouraging results, the business can evaluate whether to expand its offering, invest in localized marketing, or explore additional markets.

If the results are disappointing, the owner can reassess the opportunity without having committed substantial resources to an unproven expansion strategy.

International growth should be driven by demonstrated demand and sustainable business economics, not simply the ability to reach customers in another country.

Our third follow-up article will explore how entrepreneurs can identify promising overseas markets, evaluate international demand, and develop a practical market-entry strategy.

5. Is Your Small Business Ready to Explore International Sales?

Before pursuing overseas customers, take a few minutes to evaluate your business’s current position.

You don’t need to have every answer today. The objective is to identify which areas deserve additional research before committing resources.

International Sales Readiness: Is Your Small Business Prepared?

Before pursuing overseas customers, take a few minutes to evaluate your business’s current position.

You don’t need to have every answer today. The objective is to identify which areas deserve additional research before committing resources.

1. International Customer Demand

Have you identified potential customers outside the United States? Review your website analytics, customer inquiries, and existing sales data for signs of international interest.

2. Target Market Research

Have you identified at least one international market worth exploring? Consider customer demand, competition, pricing, language, and local business requirements.

3. Website and Communication

Can international customers understand your products or services, navigate your website, and contact your business? Determine whether translation, localized content, or additional customer support may be necessary.

4. International Payments

Can your business accept payments from customers in your target country? Research available payment methods, currency conversion, transaction fees, and fraud prevention.

5. Shipping and Delivery

Can you deliver your products or services reliably and profitably? Consider international shipping costs, customs requirements, delivery times, and return policies where applicable.

6. Taxes and Regulatory Requirements

Have you researched the U.S. and foreign regulations that may apply to your business? Depending on what you sell and where you sell it, additional tax, licensing, product compliance, or export requirements may apply.

7. International Profitability

Have you calculated the potential profitability of an international transaction? Include payment processing, currency conversion, shipping, applicable duties and taxes, and additional operating expenses.

8. Your International Growth Strategy

Can you test international demand without disrupting your existing business? Consider starting with one country, a limited product or service offering, and a manageable investment.

What Your Answers Tell You

If you answered yes to most of these questions, you may have a useful foundation for exploring international sales.

If several areas remain unanswered, use them to guide your research before investing in overseas marketing or accepting international orders.

The goal isn’t to become an international business overnight. It’s to understand the opportunity, identify potential obstacles, and take the next step with confidence.

6. Where Can Small Businesses Find Help With International Expansion?

You don’t have to navigate international commerce entirely on your own.

Several U.S. government resources provide guidance on export planning, market research, regulatory requirements, and international sales.

U.S. Small Business Administration

Provides information about export planning, financing, international market research, and trade assistance for small businesses.

Resource: Trade Tools for International Sales 

U.S. Commercial Service

Offers export guidance, market intelligence, international business resources, and assistance with identifying foreign buyers.

Resource: Learn How to Export 

International Trade Administration

Provides resources covering international e-commerce, website localization, foreign regulations, and country-specific business requirements.

Resource: Website Internationalization 

These resources can help business owners move beyond general assumptions and evaluate the specific opportunities and requirements associated with their intended markets.

Frequently Asked Questions About Selling Internationally

Can a small business sell internationally without opening an office overseas?

Yes. Many businesses can sell products or services to foreign customers from their existing U.S. operations. However, the requirements depend on the country, the business activity, and whether the company establishes a taxable or legal presence in the foreign market.

Do I need an international website to sell overseas?

Not necessarily. An existing website or online marketplace may support international transactions. However, the business should verify that customers can understand its offering, complete payments, and receive the products or services they purchase.

Can an LLC sell products or services internationally?

Yes. A U.S. LLC can engage in international business, subject to applicable U.S. and foreign laws. Forming an LLC does not, by itself, eliminate export restrictions or foreign registration and tax requirements.

Do I have to charge foreign customers in their local currency?

Not always. Depending on the payment provider and transaction arrangements, customers may be able to pay in U.S. dollars or a supported local currency. Businesses should understand conversion costs, customer payment preferences, and the amount they will ultimately receive.

Does selling internationally mean I have to pay taxes in another country?

Not necessarily. Foreign tax obligations depend on factors such as the destination country, the product or service, transaction volume, local registration thresholds, and the business’s activities in that country. Businesses should obtain qualified tax advice when evaluating their specific circumstances.

What is the easiest way to start selling internationally?

A practical starting point is to identify a country where your business has evidence of demand, research the applicable requirements, calculate the expected costs, and test a limited offering before making a larger investment.

Final Thoughts: Your Next Growth Opportunity May Be Beyond America’s Borders

For many American entrepreneurs, growing a business has traditionally meant finding more local customers, expanding into neighboring communities, opening additional locations, or introducing new products and services.

But what if your next opportunity isn’t down the street, across town, or even in another state?

What if it’s thousands of miles away?

Today’s technology has made it possible for small businesses to connect with customers around the world in ways that once required substantial financial resources and international business infrastructure.

An American retailer can reach overseas shoppers through an online marketplace. A consultant can work with clients on another continent. A small manufacturer can explore international demand without immediately establishing operations in another country.

Yet the ability to reach international customers doesn’t automatically mean a business is prepared to serve them.

Language differences, payment processing, shipping expenses, regulatory requirements, and customer expectations can all influence whether an international opportunity becomes a profitable transaction.

That’s why successful international growth begins with preparation, not expansion.

You don’t need to sell to the entire world. You need to identify where your business has an opportunity, understand what it takes to serve that market, and determine whether the potential rewards justify the investment.

For some businesses, that may mean testing a single product in Canada. For others, it could mean offering professional services to clients in Europe or making digital products available to customers in several countries.

The important thing is to start with a manageable opportunity, learn from the experience, and build on what works.

Your next customer may not live in America. But with the right preparation, your American small business may be ready to serve them.

Coming Next: Turning International Opportunity Into Business Growth

This article is the first in our four-part series exploring how American small businesses can identify, evaluate, and pursue international growth opportunities.

In the next three articles, we’ll move beyond the big picture and examine the practical steps entrepreneurs can take to prepare their businesses for overseas customers.

Part 2: Your Website Speaks English. Your Next Customer May Not.

We’ll explore how AI, website translation, international SEO, and e-commerce technology can help American businesses reach overseas customers, communicate effectively, and create a purchasing experience that builds trust across borders.

Part 3: Selling Overseas Is One Thing. Getting Paid, Delivering, and Staying Compliant Is Another.

We’ll examine international payments, currency conversion, shipping, customs, taxes, and the regulatory considerations that can affect the profitability and legality of cross-border transactions.

Part 4: The World Is a Big Market. Where Should Your Small Business Start?

We’ll bring everything together with a practical international growth strategy, showing entrepreneurs how to identify promising markets, evaluate demand, test opportunities, and expand without unnecessarily putting their existing businesses at risk.

The world is open for business. The next step is determining where your business fits in it.

Millions of Small Businesses Are Approaching an Ownership Transition. Who Will Take Over?

Why the next generation of entrepreneurs may find new opportunities in buying an established business rather than starting one from scratch.

Imagine spending 35 years building a successful business.

You’ve developed loyal customers, hired employees, established relationships with suppliers, and created something that has become part of your community.

Now you’re ready to retire.

Your children have chosen different careers. Your employees enjoy their jobs but aren’t interested in taking ownership. You don’t want to close the doors, but you can’t keep running the company forever.

Who takes over?

This is a question facing business owners across America, and it could create a significant opportunity for the next generation of entrepreneurs.

For decades, the traditional path to entrepreneurship has been relatively straightforward: develop an idea, establish a company, find customers, and build the business from the ground up.

But what if your next business opportunity isn’t something you need to create?

What if it’s a company that already exists, with customers, employees, equipment, and an owner who is ready to hand over the keys?

A growing number of ownership transitions could make buying an established business an increasingly important path to entrepreneurship over the next decade.

At a Glance: The Opportunity Behind America’s Ownership Transition

• Approximately six million U.S. small and medium-sized businesses are projected to face ownership transitions by 2035.
• More than one million are estimated to be viable candidates for sale or employee ownership, representing up to $5 trillion in enterprise value.
• Buying an existing business may provide an established customer base, operating history, equipment, and experienced employees.
• Business acquisitions can be financed through several arrangements, including conventional lending, seller financing, and qualifying SBA-backed loans.
• Entrepreneurs must evaluate a company’s financial condition, liabilities, and future operating requirements before completing a purchase.

These ownership-transition estimates come from McKinsey’s February 2026 report, The Great Ownership Transfer: A New Era of Business Stewardship. They represent projected transitions over the coming decade, not businesses currently listed for sale.

The Great Ownership Transfer: Why Millions of Businesses Are Approaching a Turning Point

America’s small-business economy is approaching a generational transition.

According to McKinsey, approximately 52% of U.S. small and medium-sized businesses are owned by individuals who are within ten years of retirement, compared with 35% in 2005.

The report estimates that approximately six million businesses with fewer than 500 employees will face ownership transitions by 2035. More than one million are considered viable candidates for sale or employee ownership.

These businesses represent much more than storefronts and company names.

They include local manufacturers, construction companies, professional-service firms, restaurants, retailers, distributors, and countless other enterprises that support communities throughout the country.

Many have spent decades developing customer relationships and building reputations that would be difficult for a new competitor to replicate.

Yet when their owners retire, someone must decide what happens next.

Some businesses will remain within their founding families. Others may be transferred to employees or sold to competitors. Some will attract first-time entrepreneurs looking for an established company to operate.

And others may close because a suitable successor cannot be found.

The opportunity isn’t simply that millions of businesses could change hands. It’s that existing customer relationships, equipment, operating systems, and institutional knowledge could be transferred to new owners rather than disappearing.

For aspiring entrepreneurs, that introduces a question worth considering:

Why build every part of a new business from scratch when an established company might already provide the foundation you’re looking for?

Buying a Business Instead of Starting One: A Different Path to Entrepreneurship

Starting a new business requires more than filing formation documents and opening a bank account.

An entrepreneur must develop a product or service, attract customers, establish supplier relationships, create operating procedures, and determine whether the business can generate enough revenue to survive.

Those challenges can take years to overcome.

Buying an established business changes the starting point.

Rather than creating every component of the company, the buyer acquires an existing operation with a history that can be evaluated.

Consider the differences:

Starting a new business	Buying an established business
Build a customer base	May acquire existing customers
Establish brand recognition	May acquire an established reputation
Develop operating procedures	May inherit existing systems
Recruit and train employees	May retain an experienced workforce
Establish supplier relationships	May continue existing relationships
Develop a revenue history	Can review historical financial performance
Requires startup capital	Requires acquisition capital and ongoing operating funds

Of course, an existing business doesn’t guarantee success.

Customers may leave after an ownership change. Employees may choose not to stay. Equipment may require replacement, and historical profitability may depend heavily on the departing owner’s personal relationships.

The advantage is not the elimination of business risk. It is the opportunity to evaluate an existing operation before deciding whether to invest in it.

What Is Actually Happening in the Business-for-Sale Market in 2026?

The anticipated ownership transition is a long-term trend, but there are already signs that business acquisition is attracting a changing group of entrepreneurs.

According to BizBuySell’s first-quarter 2026 Insight Report, 49% of surveyed small-business buyers identified themselves as people transitioning away from corporate careers, up from 44% in the previous quarter.

The report also recorded a median sale price of $350,000 and median annual cash flow of $165,256 among the transactions it tracked during the quarter.

These figures describe transactions reported through BizBuySell’s marketplace and broker network, not every small business sold in the United States.

The reported cash-flow figure should also not be confused with the amount a new owner can expect to take home. Actual earnings depend on financing costs, taxes, reinvestment needs, owner compensation, and the business’s future performance.

Nevertheless, the data illustrates that purchasing an operating business is not exclusively an activity for large corporations or private equity firms.

Individual entrepreneurs are participating in this market, too.

Are more businesses actually changing hands?

Not every indicator points toward an immediate increase in completed acquisitions.

BizBuySell reported that 2,117 businesses changed hands through its tracked market during the second quarter of 2026, a 10% decline from the previous year.

Its report also described buyers becoming more selective as financing conditions and scrutiny of business performance affected transactions.

This is an important distinction.

A growing number of owners approaching retirement does not automatically mean that every business will be available, affordable, or financially attractive.

Finding the right opportunity still requires research, preparation, and patience.

What Types of Established Businesses Could Be Worth Exploring?

The ownership-transition story extends far beyond restaurants and retail stores.

For an entrepreneur considering an acquisition, the important question is not simply which industries are growing.

It is which types of businesses match the buyer’s experience, available capital, and willingness to manage day-to-day operations.

1. Local service businesses

HVAC companies, plumbing businesses, landscaping services, commercial cleaning companies, and property-maintenance firms may have recurring customers and established local reputations.

An entrepreneur with relevant experience might consider purchasing a company whose owner is preparing to retire.

However, buyers should examine licensing requirements, employee retention, service contracts, and the company’s dependence on the departing owner.

2. Small manufacturing and distribution companies

An established manufacturer may have specialized equipment, trained employees, supplier relationships, and long-standing commercial customers.

Acquiring such a company could provide an opportunity to enter an industry without developing an entire manufacturing operation from the ground up.

Buyers should investigate equipment condition, capital requirements, customer concentration, inventory, and whether specialized technical expertise is essential to operating the company.

3. Professional-service businesses

Bookkeeping firms, marketing agencies, IT service providers, and other specialized companies may offer opportunities for entrepreneurs with relevant professional experience.

The central consideration is whether clients are loyal to the business itself or primarily to the departing owner.

Professional licensing and client-contract transfer requirements may also affect a transaction.

4. Established retail and community businesses

Independent hardware stores, specialty retailers, neighborhood shops, and other local businesses may have valuable locations, recognizable brands, and established customer relationships.

Buyers need to evaluate inventory, lease terms, competition, operating margins, and how consumer purchasing habits are changing.

The right acquisition is not necessarily the business with the highest revenue or the most recognizable name.

A smaller company with dependable customers, manageable expenses, and operations that match the buyer’s capabilities may offer a very different ownership experience from a larger business that requires substantial additional investment.

Where Do You Find Established Businesses Whose Owners Are Ready to Sell?

Not every business approaching an ownership transition has a public listing.

Some owners work with business brokers. Others explore a sale privately through accountants, attorneys, industry contacts, or existing business relationships.

For prospective buyers, there are several avenues worth investigating.

Business-for-sale marketplaces

Platforms such as BizBuySell  and BizQuest  provide listings across industries and geographic markets.

These marketplaces can help prospective buyers understand asking prices, available business categories, and the financial information sellers are willing to disclose.

Business brokers

Business brokers represent owners who are considering selling their companies and help coordinate potential transactions.

They may provide access to businesses that are not widely advertised, although buyers should understand whom the broker represents and how the broker is compensated.

Industry and professional networks

Trade associations, local chambers of commerce, accountants, and attorneys may be familiar with owners exploring succession options.

These relationships can be particularly useful for entrepreneurs interested in a specific industry or geographic market.

Direct conversations with business owners

An entrepreneur interested in a particular industry may approach an owner to explore whether a future ownership transition is being considered.

A business owner who is not actively advertising a company for sale may still be interested in discussing succession planning.

However, approaching an owner is only the beginning. Both parties must determine whether the business, purchase price, financing, and proposed transition make sense.

Can You Buy an Established Business Without Paying the Entire Purchase Price Upfront?

One of the biggest barriers to buying an established business is financing.

A company with equipment, inventory, employees, customers, and consistent revenue may require a substantial initial investment.

But buyers do not necessarily need to pay the entire purchase price from personal savings.

Depending on the transaction, financing may involve a combination of personal capital, conventional lending, seller financing, and SBA-backed loans.

SBA 7(a) loans: Financing a business acquisition

The U.S. Small Business Administration’s 7(a) loan program can support complete or partial changes of business ownership.

The program has a maximum loan amount of $5 million, although individual loan approval depends on eligibility, lender underwriting, repayment ability, and applicable SBA requirements.

An SBA loan is not a government grant or a guarantee that a particular acquisition will be approved.

The buyer must demonstrate that the proposed transaction meets the program’s requirements and that the business can reasonably support repayment.

For current eligibility requirements and financing information, visit the SBA’s official 7(a) loan program page .

Seller financing: When the departing owner helps finance the purchase

Another possible arrangement is seller financing.

Instead of receiving the entire purchase price at closing, the seller agrees to accept a portion of the payment over time under negotiated terms.

For example, a business owner might sell a company for $400,000, receive $300,000 at closing, and finance the remaining $100,000 through a promissory note.

The buyer would then make payments according to the agreement.

This is an illustrative example, not a typical or guaranteed financing arrangement.

Seller financing can help bridge a funding gap, but both parties must carefully evaluate repayment terms, security interests, default provisions, and the financial risks involved.

When an SBA-backed loan is also part of the transaction, seller financing must comply with applicable lender and SBA requirements. It should not be assumed that a seller-financed amount will automatically satisfy the buyer’s required equity contribution.

Before Buying a Business, Find Out What You’re Really Purchasing

An established business may look attractive from the outside.

It has employees, customers, equipment, and a history of generating revenue.

But what happens when you examine the financial records?

A company reporting $1 million in annual sales might appear successful, yet its operating expenses, debt obligations, and capital requirements could leave very little cash available to its owner.

A business might also depend on one major customer, an aging piece of equipment, or the personal relationships of the owner who is preparing to retire.

This is why due diligence is essential.

The SBA recommends reviewing financial information, contracts, leases, inventory, licensing requirements, and other operational details when evaluating an existing business.

Business Acquisition Due Diligence: A Quick-Reference Checklist

What to review	Why it matters
Financial statements and tax returns	Verify historical revenue, expenses, and profitability.
Bank records and cash flow	Determine whether the company generates sufficient cash to support operations and acquisition financing.
Outstanding debts and liabilities	Identify financial obligations that may affect the purchase.
Customer relationships	Determine whether revenue depends heavily on a few customers or the departing owner.
Employees and management	Evaluate staffing needs and the company’s ability to operate after the ownership transition.
Equipment and inventory	Identify potential replacement costs, obsolete inventory, and future capital requirements.
Contracts, leases, and licenses	Determine which agreements and authorizations can continue after the sale.
Legal and tax obligations	Investigate pending litigation, liens, unpaid taxes, and other potential liabilities.
Owner transition arrangements	Determine whether the seller will provide training, introductions, or other transition assistance.

A qualified accountant and business acquisition attorney can help a buyer evaluate the transaction and identify issues that might not be obvious from the seller’s financial summary.

The objective is to understand not only what the business earned in the past, but also what it may cost to operate after ownership changes.

Do You Need to Form a New LLC When Buying an Existing Business?

This is an important consideration for entrepreneurs exploring business acquisitions.

Buying a business does not automatically require forming a new limited liability company.

The appropriate structure depends on what is being purchased, the existing company’s legal structure, financing requirements, tax considerations, and the buyer’s circumstances.

Two common acquisition approaches illustrate the differences.

Asset purchase	Equity purchase
The buyer purchases specified business assets, potentially through a newly formed LLC or another entity.	The buyer acquires ownership interests in the existing company.
Assets may include equipment, inventory, intellectual property, and certain contractual rights.	The existing legal entity generally continues operating under its current structure.
Contracts, licenses, and permits may require separate assignment, consent, or new applications.	Existing contracts and licenses may remain with the entity, subject to change-of-control and other requirements.
Certain liabilities may remain with the seller, although successor-liability rules and transaction terms can create exceptions.	The acquired entity generally retains its existing obligations and liabilities.

For example, an entrepreneur purchasing the assets of a retiring business owner might establish a new LLC to complete the acquisition and operate the business going forward.

Alternatively, a buyer might acquire the membership interests of an existing LLC, allowing the legal entity to continue under new ownership.

Neither structure is automatically appropriate for every transaction.

Will you need a new EIN after purchasing a business?

The answer depends on the transaction and the legal and tax structure of the business.

A newly formed entity may need its own Employer Identification Number. In other situations, an existing entity may retain its EIN after a change in ownership.

The IRS provides specific rules for different entity types and ownership changes.

For entrepreneurs considering a new entity, MyUSACorporation offers services related to LLC formation  and obtaining an EIN .

The appropriate formation and registration steps should be determined before completing the acquisition, with guidance from qualified legal and tax professionals.

What Does This Ownership Transition Mean for Existing Small-Business Owners?

The opportunity is not limited to first-time entrepreneurs.

An existing small-business owner might consider acquiring another company to expand into a new geographic market, add complementary services, obtain specialized equipment, or establish relationships with additional customers.

Imagine a successful local landscaping company purchasing a retiring competitor.

The acquisition could provide additional service routes, equipment, experienced employees, and an established customer base.

Or consider a bookkeeping company acquiring a retiring owner’s client portfolio, subject to client consent and the terms of the transaction.

Rather than developing every new customer relationship individually, the acquiring company may be able to expand through an established operation.

However, growth through acquisition can also introduce financial strain, employee-management challenges, and operational complexity.

A buyer must determine whether the combined businesses can operate effectively and whether the acquisition price is justified by the value being acquired.

For existing business owners, acquisition is another possible growth strategy—not a substitute for evaluating the economics of the transaction.

What If You’re the Business Owner Preparing to Retire?

The other side of this story deserves equal attention.

For an entrepreneur who has spent decades building a company, selling the business may represent one of the most significant financial decisions of a lifetime.

But preparing for a successful ownership transition involves more than finding someone willing to purchase the company.

A prospective buyer will want to understand how the business operates, whether its financial records are reliable, and whether it can continue functioning without the current owner.

Business owners considering retirement can begin by examining several important questions:

• Are the company’s financial records organized and current?
• Can the business operate without the owner’s daily involvement?
• Are customer and supplier relationships documented?
• Are key employees prepared to remain after a sale?
• Is there an established succession plan?
• Has the owner obtained an independent business valuation?
• Would a family member, employee, outside entrepreneur, or existing competitor be a potential successor?

The earlier an owner begins preparing, the more time there may be to address issues that could complicate a future sale.

A successful ownership transition can preserve an existing business while providing the departing owner with an opportunity to realize the value of years of work.

Frequently Asked Questions About Buying an Established Business

Is buying an existing business less risky than starting a new one?

Not necessarily. An established company may provide historical financial information, customers, and operating systems that a new business does not have. However, it may also carry existing liabilities, outdated equipment, declining demand, or other problems. The risk depends on the specific business and transaction.

How much money do you need to buy a small business?

There is no universal minimum. Purchase prices vary widely depending on the industry, profitability, assets, location, and other factors. Buyers should budget for the purchase itself, professional fees, working capital, and potential improvements after closing.

Can you use an SBA loan to buy an existing business?

Yes. Qualifying business acquisitions can be financed through the SBA 7(a) loan program. Approval depends on applicable program requirements and the participating lender’s evaluation of the borrower and transaction.

Can you buy a business from someone who is retiring?

Yes. A retiring owner may sell a business to an individual entrepreneur, an existing company, family members, or employees. The transaction can involve business assets or ownership interests, depending on the circumstances.

Do you need an LLC to buy an existing business?

Not always. A buyer may acquire an existing entity or use a newly formed or existing entity to purchase business assets or ownership interests. The appropriate approach depends on the transaction, liability considerations, financing, and applicable legal and tax requirements.

Can you buy a business and keep its existing employees?

Potentially. Employee retention depends on the transaction structure, employment agreements, applicable law, and whether employees choose to remain. Buyers should evaluate staffing and transition plans before closing.

Final Thoughts: America’s Next Generation of Entrepreneurs May Inherit What the Last Generation Built

The next decade could bring a significant change in how Americans become business owners.

For some entrepreneurs, the opportunity will still begin with a new idea, a business plan, and the decision to build a company from the ground up.

For others, the opportunity may already exist.

It could be the local manufacturer whose owner is approaching retirement. The service company with loyal customers but no family successor. The neighborhood business that has operated successfully for decades but needs someone new to lead it forward.

These companies represent years of investment, experience, relationships, and hard work.

Their future will depend on whether the next generation sees value in continuing what previous entrepreneurs created.

Buying an established business is not necessarily easier or less expensive than starting one. It requires capital, research, careful financial evaluation, and a willingness to take responsibility for an existing operation.

But for an entrepreneur with the right experience, resources, and vision, it may provide a different path to business ownership.

The next great American business opportunity may not begin with a groundbreaking idea.

It may begin with a conversation between an owner who is ready to retire and an entrepreneur who is ready to take the company into its next chapter.

Considering Buying or Starting a Business?

Whether you’re building a company from the ground up or establishing a new entity to acquire an existing business, understanding your formation and registration requirements is an important early step.

MyUSACorporation provides business formation, EIN, registered agent, and related business services to help entrepreneurs establish and maintain their companies. Explore MyUSACorporation’s business formation services → establish and maintain their companies. Explore MyUSACorporation (Our Services)

The SBA Is Redefining “Small Business.” Could Your Company Qualify Under the Proposed New Rules?

More than 110,000 additional companies could potentially be classified as small businesses under a sweeping SBA proposal—and the agency is hearing public testimony on the changes tomorrow.

What exactly makes a business “small”?

Ten employees? Fifty? Less than $1 million in annual revenue?

The answer is more complicated than most business owners realize.

For purposes of many federal programs, the U.S. Small Business Administration doesn’t use one universal definition of a small business. Instead, SBA size standards vary by industry and are generally based on either a company’s average annual receipts or number of employees.

And now those rules could be changing.

On August 20, 2026, the SBA proposed a major overhaul of the system used to determine which companies qualify as small businesses. The proposal would simplify industry classifications and increase size thresholds in numerous industries.

According to the SBA, the changes could bring more than 110,000 additional employer firms into the small-business category.

And this isn’t an old regulatory proposal gathering dust in Washington.

Tomorrow, September 17, the SBA will hold a virtual public forum to hear testimony about the proposed changes. Testimony from the forum will become part of the official administrative record that SBA says it will consider when developing the final rule.

For growing companies that have assumed they’re simply “too big” to qualify as small businesses, this may be a development worth watching closely.

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🔎 At a Glance

What’s happening?
The SBA has proposed a significant overhaul of its small-business size standards.

Are the new standards in effect?
No. These remain proposed rules as of September 2026.

How many companies could be affected?
SBA estimates that more than 110,000 additional employer firms could be classified as small businesses under the proposal.

What’s changing?
The proposal would simplify industry classifications, raise numerous size thresholds and change the methodology SBA uses to evaluate industry market size and competition.

Why does it matter?
A company that is too large under today’s standard could potentially qualify as small under a revised standard if the proposal becomes final.

What’s happening next?
SBA is holding a virtual public forum on September 17, 2026, to gather testimony before developing the final rule.

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What Does the SBA Actually Mean by a “Small Business”?

This is where things get interesting.

There isn’t one revenue or employee number that separates every small business from every large business.

SBA size standards vary by industry and are generally based on either the number of employees a company has or its average annual receipts.

The applicable standard is tied to the company’s North American Industry Classification System (NAICS) code.

That means a company employing several hundred people might still qualify as small in one industry, while a company with much lower revenue could exceed the small-business threshold in another.

For federal contracting purposes, SBA generally averages annual receipts over the company’s latest five completed fiscal years.

Employee-based standards generally look at the average number of employees during each pay period over the company’s latest 24 calendar months.

There is another important factor business owners sometimes overlook:

Affiliates can count.

When determining size, SBA rules can require a business to include employees or receipts from affiliated companies. Affiliation generally involves the power of one business or person to control another, whether or not that power is actually exercised.

So looking at your company’s latest annual revenue or simply counting the employees on today’s payroll may not give you the complete answer.

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What Is the SBA Proposing to Change?

The August proposal would make some substantial changes to the current system.

1. Fewer Size-Standard Categories

SBA is proposing a move toward broader four-digit NAICS classifications where appropriate, rather than relying as extensively on separate six-digit classifications.

According to the agency, this would reduce the number of size-standard categories from nearly 1,000 to 338 broader industry groupings.

That’s a reduction of roughly 65%.

The idea is to make determining small-business status simpler while creating standards that SBA believes better reflect today’s competitive markets.

2. Much Higher Limits in Some Industries

This may be the biggest part of the story for growing businesses.

Some proposed size thresholds aren’t increasing by a few percentage points. They’re increasing substantially.

Consider several examples supplied directly by SBA:

Industry	Current threshold cited by SBA	Proposed threshold
Semiconductor manufacturing	1,250 employees	2,800 employees
Shipbuilding	1,300 employees	2,300 employees
Oil drilling	1,000 employees	2,650 employees
Support activities for animal production	$11 million receipts	$71 million receipts

A semiconductor manufacturer employing 2,000 people doesn’t sound like a “small business” in everyday conversation.

Under the proposed SBA standard, however, it potentially could be.

And that’s where understanding the purpose of these standards becomes important.

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How Can a Company With 2,000 Employees Be a “Small Business”?

Because “small” is relative to the industry in which a company competes.

A 2,000-employee manufacturer might sound enormous compared with a local contractor, accounting practice, retailer or consulting firm.

But that manufacturer may be competing against multinational corporations employing tens of thousands of people and generating billions of dollars in revenue.

SBA size standards aren’t designed simply to determine whether a company feels small.

They’re intended to establish the maximum size at which a business can still be treated as small within its particular industry for applicable federal programs.

That’s why the thresholds can vary so dramatically.

And it’s one reason SBA says the standards need to evolve as industries grow and change.

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SBA Is Also Rethinking How Markets Are Defined

Another interesting part of the proposal involves the geographic scope of competition.

Not every industry competes in the same kind of market.

A technology company might compete for customers nationally—or internationally—while businesses in some retail, construction and service industries may compete primarily within much smaller geographic markets.

SBA’s proposed methodology attempts to account for differences like these when evaluating industry market size and competitiveness.

That does not necessarily mean two otherwise identical companies will receive different size standards simply because they’re located in different states.

Instead, geographic competition becomes part of the methodology SBA can use when determining the characteristics and competitive environment of an industry.

The broader objective is to make the definition of “small” better reflect how businesses actually compete.

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Why Being Classified as “Small” Can Be a Big Deal

This isn’t simply about what label appears next to a company’s name.

SBA size standards help determine whether businesses are eligible to participate in certain federal programs and compete for federal contracts reserved or set aside for small businesses.

The proposed changes could therefore make additional businesses eligible to pursue SBA lending programs, federal small-business contracting opportunities and other programs—provided they meet all the other requirements of the particular program.

That’s an important distinction.

Being classified as small doesn’t automatically guarantee a loan, government contract or access to every SBA program.

But it can open the door to opportunities that otherwise wouldn’t be available.

And that creates an intriguing possibility.

A company could potentially grow out of “small business” status—and then qualify again.

Imagine a successful business that gradually exceeds its industry’s existing SBA size threshold.

As a result, the company loses its small-business classification for certain federal purposes.

If SBA subsequently raises that industry’s threshold substantially, the same company could potentially fall within the definition again.

That’s why these proposed changes deserve attention from established companies as well as startups.

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Could Your Business Suddenly Become “Small”?

Potentially.

SBA says the proposed changes would add more than 110,000 employer firms to the small-business population.

Among the approximately 6.3 million employer firms in the United States, SBA describes that as roughly a 1.8% expansion.

For a very small company with five employees, the new standards may not make much practical difference. That business probably already falls well below its applicable size threshold.

But the proposal becomes much more interesting for companies that:

🔹 Have grown close to or beyond their existing SBA size limit

🔹 Operate in industries receiving substantially higher proposed thresholds

🔹 Want to pursue federal contracting opportunities

🔹 Previously lost small-business eligibility because of growth

🔹 Have expanded through acquisitions or affiliated businesses

🔹 Operate across multiple business activities or NAICS classifications

For those businesses, the government’s definition of “small” could have very real financial consequences.

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📅 Why September 17 Matters

Before anyone begins planning around the proposed standards, there’s an important point to remember:

The rules aren’t final.

Tomorrow, Thursday, September 17, 2026, the SBA will hold a virtual public forum specifically addressing the proposed size standards and revised methodology.

The SBA says testimony presented at the forum will become part of the administrative record used in developing the final rule.

The agency is particularly encouraging participation from businesses that currently sell to the federal government and organizations involved in providing companies access to capital.

Written comments can also be submitted through the federal rulemaking process under RIN 3245-AI67.

That’s important context because the final standards could differ from what is being proposed today.

For business owners, tomorrow’s forum is another step in the process—not the finish line.

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⚡ Pro Tip: Find Your NAICS Code Before You Assume You Don’t Qualify

One of the easiest mistakes a business owner can make is assuming “small business” has one universal definition.

It doesn’t.

Your applicable NAICS classification can determine the size standard against which your business is measured.

Businesses can also conduct activities that fall under multiple NAICS codes, while individual federal contracting opportunities are assigned particular industry classifications.

Before deciding you’re too large—or assuming you’re small enough—identify the relevant NAICS code and check the applicable SBA standard.

The SBA provides an official Size Standards Tool specifically for this purpose.

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A Simple Example

Suppose a company has grown rapidly during the past several years.

It now has:

Annual receipts: $24 million
Employees: 140
Industry: A sector using a receipts-based SBA standard

Is it still a small business?

There’s not enough information to answer that question.

You would first need to identify the applicable NAICS classification and its corresponding size standard.

Then you would need to calculate receipts according to SBA rules rather than simply looking at this year’s sales.

And if the business has affiliates, their receipts may also have to be included.

That’s why a company shouldn’t automatically assume it’s too large—or small enough—to qualify.

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What Should Business Owners Do Right Now?

The proposal isn’t final, so companies shouldn’t make eligibility decisions using the proposed thresholds yet.

But that doesn’t mean there’s nothing to do.

1. Identify Your NAICS Classification

Determine which NAICS codes accurately describe your company’s products or services.

2. Check Your Current SBA Size Standard

Use the official SBA Size Standards Tool instead of relying on a generic definition of small business.

3. See How Close You Are to the Current Limit

Businesses approaching or recently exceeding their existing threshold have an obvious reason to monitor the rulemaking process.

4. Look at the Proposed Standard for Your Industry

Some of the proposed increases are significant. Companies that previously dismissed SBA opportunities because they were too large may want to revisit that assumption if the proposal becomes final.

5. Review Potential Affiliations

Subsidiaries, ownership structures and relationships with other businesses can affect SBA size calculations.

6. Follow What Happens After the September 17 Forum

The testimony and written comments submitted during the rulemaking process will be considered by SBA before it develops the final rule.

Until that happens, today’s standards remain the ones businesses should use.

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Don’t Confuse “Proposed” With “Approved”

This distinction deserves emphasis.

A headline saying the SBA is “redefining small business” can easily sound as though the changes have already happened.

They haven’t.

SBA announced the proposed overhaul on August 20, 2026.

The agency is still accepting and evaluating input, including testimony at the September 17 public forum.

Until a final rule is issued and becomes effective, businesses should continue using the currently applicable SBA size standards when determining their eligibility.

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Frequently Asked Questions

Is every business with fewer than 500 employees considered a small business?

No.

You may frequently see 500 employees used as a broad statistical definition of small business, but SBA program and federal contracting eligibility relies on industry-specific size standards.

Are SBA size standards based on revenue or employees?

Both can be used.

Which measurement applies depends largely on the company’s industry and NAICS classification.

Do affiliated companies count toward my size?

They can.

SBA rules require businesses to account for affiliates when calculating size where the affiliation rules apply. That can mean including affiliated employees or receipts.

Have the new 2026 SBA size standards taken effect?

No.

As of September 16, 2026, the major changes announced August 20 remain proposed.

What happens on September 17?

SBA will hold a virtual public forum to hear testimony concerning the proposed size standards and revised methodology.

According to SBA, testimony will become part of the administrative record and will be considered along with written comments when the agency develops its final rule.

Could a company that’s currently too large become eligible?

Potentially.

Because many proposed thresholds would increase, some companies that exceed today’s standards could fall within a new threshold if the applicable proposal becomes final.

Eligibility would still depend on the final rule, the company’s industry, applicable size calculations, affiliation rules and the requirements of the particular federal program or contract.

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The Bigger Picture: Growth Shouldn’t Automatically Close the Door

Perhaps the most interesting part of the SBA proposal is what it says about the changing scale of American business.

A company can grow considerably and still be relatively small compared with the dominant competitors in its industry.

That’s particularly true in capital-intensive industries where businesses need significant workforces, equipment, technology and revenue simply to compete.

SBA’s proposal attempts to account for that changing reality while simplifying a classification system that has grown increasingly complex.

For entrepreneurs and established business owners, there’s also a practical lesson:

Don’t assume your company is too large—or too small—for an opportunity until you check.

Industries change. Businesses grow. Government standards change with them.

And if the SBA ultimately adopts these expanded standards, more than 110,000 additional employer businesses could find themselves looking at opportunities that weren’t previously available to them.

For some growing companies, being redefined as “small” could turn out to be a very big deal.

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Official Government Resources

U.S. Small Business Administration — Proposed Size Standards Overhaul
SBA’s August 20, 2026 announcement explains the proposed changes, the 110,000-business estimate, industry examples and the move toward broader NAICS classifications.

U.S. Small Business Administration — September 17 Public Forum
SBA’s official announcement explains the public testimony process and how comments will be considered when developing the final rule.

U.S. Small Business Administration — Size Standards Tool
Business owners can use SBA’s official tool to check whether their business currently qualifies as small for government contracting purposes.

This article is intended for general informational purposes and should not be considered legal, financial or government-contracting advice.

A New $2,000 Reporting Threshold Changes When Businesses Issue Form 1099-NEC—but It Doesn’t Make the Income Tax-Free

For decades, $600 was one of those numbers small business owners simply knew.

Hire a freelancer, consultant, designer, bookkeeper or other independent contractor and pay them $600 or more during the year, and there was a good chance a Form 1099 would eventually enter the conversation.

In 2026, that familiar number changed.

For qualifying payments made during 2026, the federal reporting threshold for Form 1099-NEC increased from $600 to $2,000. The threshold will also be adjusted for inflation beginning after 2026.

That’s a meaningful change, especially for small businesses that routinely bring in freelancers and independent contractors for smaller projects.

It’s also an easy change to misunderstand.

The new rule does not mean that someone can earn $1,999 tax-free. It doesn’t mean businesses should stop keeping records of payments below $2,000. And it certainly doesn’t mean that every Form 1099 now has the same $2,000 threshold.

So what actually changed?

Let’s break it down from the perspective of the business owner writing the checks.

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💰 Why Did the $600 Rule Change?

Here’s the remarkable part: the old $600 statutory threshold dated all the way back to 1954.

Think about how much business has changed since then.

A $600 transaction in the 1950s represented something very different from a $600 transaction today, yet the reporting threshold remained largely frozen for more than seven decades.

For qualifying payments made after December 31, 2025, the threshold increased to $2,000. Beginning after 2026, it will be adjusted for inflation.

For a small business using several contractors during the year, that could eliminate a fair amount of year-end paperwork.

Suppose your company hires a photographer for $900, a designer for $1,200 and a consultant for $1,500 during 2026.

Those payments may now fall below the federal Form 1099-NEC reporting threshold, assuming they otherwise fall under the rule and no special reporting requirement applies.

Under the old $600 threshold, the result could have been very different.

That’s the practical benefit.

But don’t throw away your bookkeeping system just yet.

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🚨 The $2,000 Threshold Doesn’t Make $1,999 Tax-Free

This is probably the most important point in the entire article.

A reporting threshold and a tax obligation are not the same thing.

Imagine a freelancer earns $1,800 from your company during 2026.

Your business may not be required to issue that person a Form 1099-NEC solely because of that payment.

That does not automatically mean the freelancer gets to ignore the $1,800.

A 1099 is an information return. It reports certain payments to the IRS and to the person or business receiving them.

Whether income is taxable is a separate question.

That’s particularly important for freelancers, gig workers and people running side businesses who may assume:

“I didn’t get a 1099, so I don’t have to report the money.”

That’s not how it works.

No 1099 does not automatically mean no taxable income.

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👷 What Changes When You Hire Independent Contractors?

This is where most small business owners are likely to encounter the new rule.

Form 1099-NEC is generally used to report qualifying payments for services performed by someone who isn’t your employee.

Think about the people a growing business might bring in during a typical year:

🔹 Freelance designers and writers
🔹 Marketing consultants
🔹 Independent bookkeepers
🔹 Web developers and IT contractors
🔹 Photographers
🔹 Repair and maintenance contractors
🔹 Business consultants
🔹 Other self-employed service providers

Let’s say your LLC hires an independent marketing consultant.

You pay her $1,500 during 2026.

Assuming there aren’t other circumstances that trigger reporting, that’s below the new $2,000 Form 1099-NEC threshold.

But perhaps the original project goes well and you hire her again.

By December, you’ve paid her $3,500.

Now you’ve crossed the threshold, and Form 1099-NEC may be required.

That’s one reason the new $2,000 rule shouldn’t change how carefully you track contractor payments throughout the year.

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📋 Should You Still Get a W-9?

Absolutely—and this is one business habit I wouldn’t change.

A Form W-9 provides information you may need later, including the contractor’s legal name, taxpayer identification number and federal tax classification.

Waiting until January to track down a contractor you last worked with nine months earlier isn’t much fun.

There’s also no way to know when a small project will become a larger one.

The designer you expect to pay $750 could end up doing $3,000 worth of work. The consultant hired for one project may become someone you use throughout the year.

Collecting the appropriate vendor information when the relationship begins is simply cleaner business.

The threshold changed.

Good recordkeeping didn’t.

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🧾 Be Careful With the Phrase “The 1099 Limit Is Now $2,000”

This is where overly simplified headlines can get business owners into trouble.

There isn’t one universal “$2,000 rule” covering every 1099 situation.

For 2026, the higher threshold applies to a number of common reporting categories. For example, certain rents, prizes and awards, other income, medical and healthcare payments, and nonemployee compensation can be subject to the $2,000 threshold.

But exceptions and different thresholds remain.

Royalties, for example, can still have a much lower reporting threshold. Gross proceeds paid to attorneys generally retain a $600 Form 1099-MISC reporting threshold, while qualifying attorneys’ fees reported as nonemployee compensation are generally subject to the $2,000 threshold.

There are other specialized situations as well.

So rather than asking:

“Did I pay this person $2,000?”

The better question is:

“What kind of payment did my business make, and which reporting rule applies to it?”

That distinction matters.

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💳 And Then There’s PayPal, Venmo and Form 1099-K

Here’s where things get even more confusing.

Form 1099-NEC and Form 1099-K aren’t interchangeable.

Form 1099-NEC generally concerns qualifying nonemployee compensation.

Form 1099-K reports certain payment-card and third-party-network transactions.

Under current federal rules, a third-party settlement organization such as a qualifying payment app or online marketplace generally isn’t required to issue a Form 1099-K unless payments for goods or services exceed $20,000 AND there are more than 200 transactions during the year.

A platform can still send a 1099-K below those federal thresholds, and state reporting rules may differ.

Also worth knowing: payment-card transactions have different reporting rules and don’t receive that same de minimis threshold.

So don’t blend the two forms together.

🔵 $2,000

Think certain Form 1099-NEC and Form 1099-MISC reporting requirements in 2026.

🔴 More than $20,000 AND more than 200 transactions

Think the current federal Form 1099-K threshold for third-party settlement organizations.

🟢 What you actually earned

That’s a different question altogether.

The form you receive—or don’t receive—doesn’t by itself determine whether income is taxable.

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🏢 What Should a Small Business Actually Do?

For most businesses, the answer isn’t complicated.

Keep doing the things a well-run business should already be doing.

✅ Track contractor payments from the first dollar

You don’t want to discover in January that a contractor quietly crossed a reporting threshold months earlier.

✅ Get the W-9 early

Do it when the relationship begins rather than chasing paperwork after the work is finished.

✅ Keep business and personal activity separate

Clean banking and bookkeeping make tax reporting considerably easier as a company grows.

✅ Know which form you’re dealing with

1099-NEC, 1099-MISC and 1099-K aren’t different names for the same thing.

✅ Check state requirements

Federal thresholds don’t necessarily override separate state reporting requirements.

✅ Review everything before year-end

A quick contractor and vendor review in November or December can uncover missing information while there’s still time to fix it.

And when a payment falls into an unusual category, that’s the time to involve your accountant or tax professional rather than guessing.

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⚠️ One Thing the New Rule Doesn’t Change: Employee vs. Contractor

There’s another issue worth mentioning because it’s an easy mistake for young companies to make.

Raising the reporting threshold to $2,000 doesn’t change the rules determining whether someone is an employee or an independent contractor.

A company can’t make someone a contractor simply because handling a 1099 seems easier than running payroll.

Worker classification depends on the actual working relationship and applicable federal and state rules.

That distinction becomes increasingly important as a company grows.

A business may start with a founder and a few people helping on projects. Over time, those informal arrangements can evolve into regular working relationships—and that’s when classification, payroll and tax questions become much more important.

The new threshold changes information reporting.

It doesn’t rewrite employment law.

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🚀 Less Paperwork. Same Need for Good Records.

There’s something sensible about updating a dollar threshold that had been around since 1954.

Business changed.

Prices changed.

The way companies hire people changed.

The $600 number didn’t.

Moving the threshold to $2,000 should reduce some of the paperwork associated with smaller contractor relationships. Indexing it for inflation should also prevent another decades-long freeze.

But I wouldn’t look at this as permission to pay less attention to your books.

I’d look at it as another reason to get them right.

Know whom you’re paying. Know what you’re paying them for. Keep the documentation. Understand whether someone is actually an independent contractor. And know which reporting requirements apply before January arrives.

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And This Isn’t the Only Small Business Rule Changing in 2026

That’s the bigger story we’re watching.

The rules surrounding small business ownership don’t stand still. Federal reporting requirements, business classifications, financing programs and compliance obligations continue to evolve.

Some changes remove paperwork.

Some open doors.

Others simply replace an old question with a new one.

Over the coming weeks, we’ll be looking at more of those changes and, more importantly, what they actually mean if you’re starting or running a business.

Because forming an LLC or corporation is the beginning.

Knowing how to operate it is what comes next.

This article is for general informational purposes only and isn’t intended as tax or legal advice. Tax and reporting requirements vary depending on the circumstances. Consult an appropriate tax or legal professional regarding your business.

Do LLCs Still Have to File a BOI Report in 2026? FinCEN Just Changed the Rules

What the August 2026 Final Rule Means for LLCs, Corporations, Foreign Companies and U.S. Business Owners

Updated September 2026

If you own an LLC or corporation in the United States, you may remember the wave of warnings that began a few years ago:

File your Beneficial Ownership Information report. Watch the deadline. Don’t risk the penalties.

Then the deadlines changed.

Court cases followed. Federal enforcement policy changed. And the reporting rules themselves changed.

Now there is another major development.

On August 11, 2026, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, issued a final rule making permanent the BOI reporting exemptions for U.S. companies and U.S. persons that were introduced in 2025.

The final rule became effective August 14, 2026.

For millions of American business owners, the answer is now straightforward:

U.S.-created companies are no longer required to file BOI reports with FinCEN.

That includes the typical LLC or corporation created under the laws of a U.S. state.

But BOI reporting has not disappeared completely.

Certain companies formed under the laws of a foreign country and registered to do business in the United States can still have BOI reporting obligations.

That distinction is important—particularly because years of older articles, emails, compliance notices and even some government materials remain online.

Here’s what business owners need to know now.

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What Is Beneficial Ownership Information?

Beneficial Ownership Information, commonly called BOI, identifies certain individuals who own or exercise substantial control over a company.

BOI reporting was created under the Corporate Transparency Act (CTA) as part of an effort to make it more difficult to use anonymous companies for money laundering and other illicit activities.

When the original requirements took effect, many LLCs, corporations and other entities created in the United States potentially fell within the reporting requirements unless they qualified for an exemption.

For millions of small businesses, that created an entirely new federal compliance responsibility.

That framework has now changed substantially.

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The Big 2026 Change: U.S. Companies Are Exempt

FinCEN’s August 2026 final rule makes permanent the exemption from BOI reporting for U.S. companies and expands relief for U.S. persons.

FinCEN’s current guidance is explicit: U.S. companies are exempt from BOI reporting requirements and therefore no longer need to file BOI reports.

The simple version:

Business Situation	BOI Report Required?
LLC created under U.S. law	No
Corporation created under U.S. law	No
U.S.-created company owned by U.S. persons	No
U.S. person with a FinCEN ID	No BOI update/correction requirement
Certain foreign companies registered to do business in the U.S.	Potentially yes
U.S. beneficial owner of a foreign reporting company	U.S. person’s BOI is not reported

For the typical entrepreneur starting an LLC or corporation in the United States, BOI reporting is no longer part of the federal formation checklist.

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Didn’t the BOI Requirement Already Change in 2025?

Yes.

And this is an important distinction.

The major exemption for domestic companies actually began in 2025, not August 2026.

FinCEN issued an interim final rule in March 2025 that revised its regulations so the reporting-company definition generally applied only to certain entities formed under the law of a foreign country and registered to do business in the United States.

Entities created in the United States were exempted from BOI reporting.

The August 2026 final rule is important because it makes those exemptions permanent and expands relief for U.S. persons.

So if you heard in 2025 that a domestic U.S. LLC no longer needed to file a BOI report, that information was correct.

The August 2026 rule finalizes that framework.

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I Formed an LLC in the United States. Do I Need to File BOI?

For a typical LLC created under the laws of a U.S. state:

No.

FinCEN states that entities created in the United States are exempt from BOI reporting requirements.

Consider three examples.

Florida LLC

Maria forms an LLC under Florida law.

BOI filing required? No.

Texas LLC

David creates a Texas LLC for his consulting business.

Even if David is the company’s sole owner, the Texas LLC is a U.S.-created entity.

BOI filing required? No.

Delaware Corporation

A group of entrepreneurs incorporates a startup in Delaware.

The corporation was created under U.S. law.

BOI filing required? No.

The state changes.

The basic BOI result does not.

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What About an LLC Created Before the Rules Changed?

The exemption isn’t limited to companies formed after August 2026.

U.S.-created entities are exempt under FinCEN’s current rules regardless of whether they were created before or after the latest final rule.

That is particularly important for business owners who may still have an old compliance reminder sitting in their inbox—or who find an older article telling them that they need to submit a BOI report.

Check the date of the information you’re reading.

FinCEN itself currently warns that some BOI information on its website may be outdated and specifically tells users to disregard older guidance stating that U.S. companies or their beneficial owners must report BOI.

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What If I Already Filed a BOI Report?

Millions of business owners complied with earlier versions of the reporting requirements.

If you’re one of them, that doesn’t mean you did anything wrong. You followed the requirements and guidance applicable at the time.

The August 2026 final rule provides additional relief for U.S. persons.

FinCEN announced that it will delete previously reported information by U.S. persons who are now exempt from BOI reporting from the BOI database.

FinCEN also states that U.S. persons with a FinCEN Identifier are not required to update or correct information they previously submitted to FinCEN.

That’s an important distinction from the original BOI regime.

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Who Still Has to File a BOI Report?

This is where business owners need to be careful.

BOI reporting has not been eliminated altogether.

Under FinCEN’s current framework, a reporting company generally must be an entity that:

1. Was formed under the laws of a foreign country;
2. Subsequently registered to do business in a U.S. state or Tribal jurisdiction by filing a document with a secretary of state or similar office; and
3. Does not otherwise qualify for an exemption.

FinCEN describes these as the entities formerly known as foreign reporting companies.

For example:

A company incorporated under Canadian law subsequently registers to conduct business in a U.S. state.

That is fundamentally different for BOI purposes from an LLC originally formed under the laws of Florida, Texas or another U.S. state.

The Canadian company may have BOI reporting responsibilities.

The domestic U.S. LLC does not.

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“Foreign LLC” Doesn’t Always Mean Foreign for BOI Purposes

This is one of the most confusing parts of the terminology.

States frequently use the term foreign LLC to describe an LLC created in another U.S. state.

Suppose you create:

Example LLC in Maine

and later register that LLC to conduct business in New Hampshire.

New Hampshire may treat the Maine company as a foreign LLC because it was created outside New Hampshire.

But Maine is obviously not a foreign country.

For BOI purposes, the company was still created under the laws of the United States.

That’s different from a business formed under the laws of Canada, the United Kingdom, Germany or another country and subsequently registered to do business in the United States.

“Foreign” for state registration purposes does not necessarily mean “foreign” for FinCEN BOI purposes.

This is an important distinction for companies operating in multiple states.

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What About U.S. Owners of Foreign Reporting Companies?

The final rule also provides significant relief for U.S. persons.

Reporting companies do not need to report BOI for U.S. person beneficial owners or U.S. person company applicants.

U.S. persons also do not need to provide their BOI to reporting companies for which they are beneficial owners or company applicants.

A foreign company that remains subject to BOI reporting should therefore determine exactly whose information must be reported rather than relying on BOI instructions written before the rules changed.

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What Are the Filing Deadlines for Foreign Reporting Companies?

Certain foreign entities that remain reporting companies still need to pay close attention to FinCEN’s filing requirements.

Under FinCEN’s current guidance:

Foreign reporting companies registered to do business in the United States before March 26, 2025 were required to file by April 25, 2025.

Foreign reporting companies registered on or after March 26, 2025 generally have 30 calendar days after receiving notice that their registration is effective to file their initial BOI report.

Because BOI obligations depend upon the entity and its circumstances—and because the rules have changed several times—foreign businesses should confirm their requirements using FinCEN’s current guidance.

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BOI Is Gone for U.S. Companies. Business Compliance Isn’t.

This may be the most important takeaway.

A domestic LLC no longer having to file a BOI report does not mean the LLC no longer has compliance responsibilities.

BOI was only one potential requirement.

Depending on the state and the type of business, an LLC or corporation may still need to deal with:

• Annual or biennial reports
• State filing fees
• Franchise or similar state taxes
• Registered agent requirements
• Business licenses and permits
• State tax registrations
• Employer registrations
• Federal and state tax filings
• Local licensing requirements
• Changes to company information
• Foreign qualification when doing business in additional states

Eliminating one federal reporting requirement doesn’t eliminate the obligations necessary to keep a company active and in good standing.

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Don’t Confuse BOI Reporting With Your Annual Report

They’re completely different.

A BOI report is a federal filing administered by FinCEN under the Corporate Transparency Act.

An annual or biennial report is generally a state filing used to keep information about a business entity current.

So:

BOI exemption does not mean annual-report exemption.

If your state requires an annual or biennial report, the elimination of federal BOI reporting for U.S. companies does not eliminate that state requirement.

Missing required state filings can result in penalties, loss of good standing and, in some circumstances, administrative dissolution.

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Don’t Confuse BOI Reporting With an EIN Either

An Employer Identification Number (EIN) is also completely separate from BOI reporting.

The IRS issues EINs for federal tax-administration purposes.

Depending upon the circumstances, an LLC may need an EIN for federal tax filings, hiring employees, banking or other business purposes.

The elimination of BOI reporting for domestic companies does not eliminate EIN requirements.

That’s why entrepreneurs should think about business formation as a process rather than a single filing.

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Starting an LLC in 2026? Here’s What Comes Next

The BOI change simplifies one aspect of starting and maintaining many U.S. businesses.

But forming an LLC is still just the beginning.

After formation, business owners should determine whether they need to:

1. Obtain an EIN
Determine whether your business needs an Employer Identification Number from the IRS.

2. Create an operating agreement
An operating agreement can establish ownership, responsibilities and rules for operating the LLC.

3. Establish a business bank account
Separating business and personal finances can make recordkeeping and business administration significantly easier.

4. Determine licensing requirements
Licenses and permits can exist at federal, state, county and municipal levels depending on the business.

5. Register for applicable taxes
Sales tax, payroll taxes and other registrations may apply.

6. Maintain a registered agent
LLCs and corporations generally need to maintain a registered agent as required by their state of formation or registration.

7. Track ongoing state compliance
Know when annual or biennial reports and other required state filings are due.

8. Register in additional states when required
Expanding business activities into another state may create foreign qualification requirements.

The BOI requirement has been removed for U.S.-created companies.

The need to properly maintain your business has not.

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Why Are Business Owners Still Finding Conflicting BOI Information?

Search for BOI requirements online and you may still encounter information saying that U.S. LLCs must file.

There’s a simple reason:

The rules changed faster than many websites did.

FinCEN itself acknowledges this problem.

Its current FAQ pages warn that some information may be outdated and specifically instruct readers to disregard older guidance saying U.S. companies or their beneficial owners must report BOI.

That makes publication and update dates unusually important when researching BOI.

An article written in 2024 may have been accurate when published—and completely wrong for a domestic LLC today.

Whenever possible, business owners should verify BOI information against current FinCEN guidance.

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Frequently Asked Questions About BOI Reporting in 2026

Do LLCs have to file a BOI report in 2026?

LLCs created under U.S. law are exempt from federal BOI reporting under FinCEN’s current rule.

Do U.S. corporations have to file BOI?

Corporations created under U.S. law are also exempt.

I just formed a new U.S. LLC. Do I have 30 days to file BOI?

No. The current 30-day requirement applies to certain qualifying foreign reporting companies, not an LLC created under U.S. law.

I already filed BOI. Do I need to keep updating it?

U.S. companies are now exempt from BOI reporting. FinCEN also states that U.S. persons with FinCEN IDs aren’t required to update or correct information they previously submitted.

Is the Corporate Transparency Act gone?

No.

The CTA still exists, but FinCEN’s regulations have substantially narrowed the entities and individuals subject to BOI reporting.

Is a Delaware LLC considered a foreign company for BOI purposes if I live in another state?

No. An LLC created under Delaware law is a U.S.-created entity for BOI purposes.

What if my LLC operates in multiple states?

Operating in multiple states can create foreign qualification requirements at the state level, but registering a U.S.-created LLC in another U.S. state doesn’t turn it into an entity formed under foreign-country law for BOI purposes.

Does the BOI exemption mean I don’t need a registered agent?

No. Registered-agent requirements are separate from BOI reporting.

Does the BOI exemption mean I don’t have to file my annual report?

No. State annual or biennial reporting requirements are separate from federal BOI reporting.

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Final Thoughts: One Less Filing Doesn’t Mean You’re Done

For American small-business owners, the August 2026 BOI final rule provides something that has sometimes been difficult to find during the implementation of the Corporate Transparency Act:

Clarity.

A typical LLC or corporation created under U.S. law is no longer required to file Beneficial Ownership Information with FinCEN.

That’s good news for entrepreneurs.

But it also illustrates a larger lesson about owning a business.

Compliance changes.

Deadlines change. Regulations change. Businesses expand. States have different requirements. What applied when you formed your company may not be what applies several years later.

The smartest approach isn’t simply checking “LLC formed” off a list.

It’s understanding what comes next—and keeping your business compliant as it grows.

MyUSACorporation.com helps entrepreneurs form and maintain U.S. business entities, obtain EINs, meet registered-agent requirements, navigate foreign qualification and handle ongoing business filings.

Whether you’re starting your first company or expanding an existing business into another state, understanding the requirements before they become a problem can save considerable time and frustration later.

This article is provided for general informational purposes only and does not constitute legal, tax or financial advice. BOI requirements and other business regulations can change. Businesses with questions about their specific obligations should review current government guidance and consult an appropriate professional.

The Labor Market Doesn’t Just Need More Workers or More Jobs. It Needs Better Matches.

This Labor Day, maybe the labor shortage isn’t simply about people. Maybe it’s about the growing gap between what workers need and what small businesses can offer.

Labor Day has traditionally been a celebration of American workers—the people who build things, sell things, fix things, deliver things, manage businesses, care for people and keep the economy moving.

But Labor Day 2026 arrives with an interesting contradiction.

According to the latest Bureau of Labor Statistics report, the United States added 162,000 jobs in August, while unemployment remained at 4.1%. At the same time, millions of Americans remain unemployed, underemployed or outside the labor force despite wanting work.

Meanwhile, on Main Street, employers tell a very different story.

The latest NFIB survey found that 35% of small-business owners had job openings they could not fill. Among businesses hiring or trying to hire, 47% reported finding few or no qualified applicants.

Think about that for a moment.

People are looking for work.

Businesses are looking for people.

And somehow, they’re still having trouble finding each other.

Maybe this Labor Day we should stop asking:

“Where did all the workers go?”

And ask a better question:

Why Aren’t the Workers and the Jobs Connecting?

It’s tempting to pick a side.

Workers sometimes hear that “nobody wants to work anymore.”

Employers hear that they simply need to “pay people more.”

Neither explanation captures what’s really happening.

There are frustrated workers who have submitted dozens of applications without getting an interview.

There are small-business owners who have advertised the same position repeatedly without finding someone who stays.

There are people who genuinely want to work but need schedules that fit childcare, transportation, health, education or other responsibilities.

And there are business owners who would love to pay substantially higher wages but have to make those numbers work alongside rent, insurance, inventory, utilities, payroll taxes and everything else required to keep their doors open.

Both sides can be frustrated.

And both sides can be right.

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👷 The View From the Worker

Imagine looking for a job today.

You find a posting that seems promising.

You update your résumé.

You complete an online application.

You answer screening questions.

You upload the résumé you already entered manually.

Then…

Nothing.

Perhaps a computer decided you didn’t have the right keywords.

Maybe you have 25 years of experience, but not in precisely the industry listed in the posting.

Maybe you’re 60 and looking for a less demanding second act.

Maybe you’re 25 and nobody will hire you because every “entry-level” position seems to require experience.

Maybe you spent years managing people but now want a job with fewer responsibilities.

Or perhaps you took time away from the workforce and your résumé doesn’t follow the clean, uninterrupted career progression an algorithm expects.

There are also financial realities.

A worker doesn’t experience a wage as a number in a job advertisement.

They experience it after paying for housing, groceries, gasoline, childcare, healthcare and everything else required to live.

BLS reported that inflation-adjusted average hourly earnings were actually 0.2% lower in July than a year earlier.

So when workers say they’re struggling, we should listen.

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🏪 Now Stand Behind the Counter With the Small-Business Owner

The view can look completely different from the other side.

The owner posts a position.

Applications arrive.

Some candidates never respond.

Some schedule interviews and don’t show up.

Others aren’t available during the hours the business actually needs covered.

Some applicants have impressive résumés but aren’t a good fit for the job.

And every dollar added to payroll has to come from somewhere.

Small businesses are still dealing with significant cost pressures. In the U.S. Chamber’s Q2 2026 Small Business Index, 57% of small businesses identified inflation as their biggest concern, while only 16% described themselves as very comfortable with their cash flow.

Yet many employers are responding to the labor market. NFIB reported that a net 31% of small-business owners raised compensation in August.

The idea that every small-business owner could simply raise wages dramatically ignores the economics of running a small company.

A multinational corporation may be able to absorb higher labor costs across thousands of products, locations or customers.

The neighborhood retailer, restaurant, contractor or service business doesn’t necessarily have that luxury.

So when small-business owners say they’re struggling, we should listen to them too.

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This Matters Because Small Businesses Are a Huge Part of America’s Hiring Machine

Here’s something that gets lost in the discussion.

Small businesses aren’t sitting on the sidelines of the American labor market.

They’re driving an enormous part of it.

A U.S. Chamber analysis found that small businesses have accounted for roughly 80% of U.S. hires since early 2025—approximately four million hires per month.

That makes solving this disconnect much bigger than an HR problem.

It’s an economic opportunity.

And perhaps the solution starts with both sides reconsidering what they’re looking for.

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🌉 We Need to Build Better Bridges Between Workers and Small Businesses

There probably isn’t one solution to America’s labor-market mismatch.

But there are places to start.

1. Hire for Capability, Not Just Biography

Small businesses may need to rethink the “perfect candidate.”

A résumé tells you where someone has been.

It doesn’t necessarily tell you what that person can do next.

Someone with 20 years in another industry may understand customers, operations, leadership, problem-solving and accountability even if they don’t have the exact experience listed in your job description.

Likewise, a younger applicant without an extensive résumé may bring energy, technological fluency and a willingness to learn.

Experience matters.

But so do reliability, judgment, adaptability and attitude.

Sometimes businesses should hire the person rather than the résumé.

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2. Make Flexibility Part of the Compensation Package

A small business may not always be able to beat a corporation on salary.

But it may be able to compete differently.

Predictable schedules.

Four-day arrangements.

Part-time positions.

Flexible start times.

Seasonal opportunities.

Job sharing.

Reduced hours for experienced workers who no longer want a 50-hour week.

Flexibility has value.

And small businesses are often uniquely positioned to provide it because decisions can sometimes be made between an employee and an owner rather than through several layers of corporate policy.

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3. Workers May Need to Look Beyond the Job Title

Workers may need to rethink something too.

Your next good job doesn’t necessarily have to look like your last good job.

That can be especially difficult for someone who has spent decades building a career.

Moving from a corporate position into a small business can look like a step backward on paper.

It doesn’t necessarily have to be one in life.

Maybe the next opportunity provides less status but more flexibility.

Maybe it pays less initially but eliminates a two-hour commute.

Maybe you no longer manage 30 people—and discover you don’t miss managing 30 people.

Maybe the job is simply a bridge while you build something else.

Careers don’t always move vertically.

Sometimes they move sideways.

Sometimes they restart.

And sometimes the next chapter isn’t supposed to look like the last one.

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4. Stop Overlooking Experienced Workers

One of America’s most underappreciated labor pools may be sitting right in front of us.

Older workers.

Semi-retirees.

Former executives.

Career changers.

People who have spent decades working but no longer want—or need—the career they had at 45.

These workers may bring something incredibly valuable to a small business:

experience without necessarily demanding another corporate career.

At the opposite end, businesses also need to create more opportunities for inexperienced workers to become experienced workers.

One small-business example highlighted by the U.S. Chamber this year demonstrates what’s possible. After struggling to attract younger automotive workers, Dynamic Automotive developed apprenticeship programs and career paths with local schools and eventually created a waiting list of students interested in joining the company.

They didn’t wait for the perfect labor pool.

They helped build one.

That’s a lesson worth remembering.

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5. Don’t Let Technology Keep Two People Who Need Each Other Apart

Technology was supposed to make hiring easier.

Sometimes it has.

But we’ve also created a strange system.

Employers receive hundreds of digital applications.

Workers send hundreds of digital applications.

Algorithms filter résumés.

Software scores candidates.

Automated emails reject applicants.

And somewhere in all that efficiency, two actual human beings who might work very well together never have a conversation.

AI will undoubtedly become an even bigger part of recruiting.

But especially for small businesses, perhaps technology should help identify candidates—not completely replace human judgment.

Sometimes a 15-minute conversation tells you something a keyword filter never will.

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🤝 And Both Sides Need to Be Honest About the Deal

Employers should be clear about:

Pay.

Hours.

Responsibilities.

Physical requirements.

Advancement opportunities.

And what the job actually looks like on a difficult Tuesday afternoon—not just how it sounds in the advertisement.

Workers owe employers honesty too.

Be realistic about availability.

Show up for interviews.

Ask questions.

Understand the expectations.

And if a job isn’t right, say so.

A better labor market requires something remarkably old-fashioned:

People keeping their word.

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This Labor Day, Maybe We Need a Different Conversation About Work

Labor Day shouldn’t be about employers versus employees.

It shouldn’t be about blaming younger generations.

It shouldn’t be about blaming corporations.

And it shouldn’t be another opportunity to declare that nobody wants to work anymore.

Labor Day celebrates work—and the people who do it.

The person opening the store at 6 a.m.

The owner who hasn’t taken a real vacation in three years.

The 67-year-old who still has plenty to contribute.

The 22-year-old waiting for someone to give them their first real opportunity.

The parent trying to fit work around a family.

The experienced professional rebuilding after a layoff.

The employee who simply wants a fair day’s pay for a fair day’s work.

And the small-business owner looking at next week’s schedule wondering how they’re going to cover Friday.

These people aren’t necessarily on opposite sides of America’s labor problem.

In many cases, they’re looking for each other.

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America Has Workers. Small Businesses Have Jobs.

Perhaps the opportunity ahead isn’t simply about creating more jobs.

And it isn’t simply about finding more workers.

It’s about creating a labor market flexible enough to connect people who want to work with businesses that need them—even when neither looks exactly like what the other expected.

Employers may need to reconsider who qualifies.

Workers may need to reconsider what qualifies as opportunity.

Businesses may need to train rather than simply recruit.

Technology may need to facilitate conversations rather than eliminate them.

And both sides may need to meet somewhere in the middle.

Because despite all the headlines about labor shortages, layoffs, AI, wages and the future of work, one fundamental relationship hasn’t changed:

Businesses need people.

People need opportunity.

This Labor Day, maybe we should get better at introducing them.

Happy Labor Day from MyUSACorporation.com.

The Way We Work Has Changed. The Opportunity Hasn’t.

From the workers and entrepreneurs who built America to the small businesses, side hustles and new ideas shaping what comes next.

Labor Day has always been about work.

But maybe this year, it’s also worth thinking about what work has become—and where it’s going next.

For generations, the American formula seemed relatively straightforward:

Work hard. Learn a trade. Build a career. Start a business. Create something better for the generation that follows.

The details changed, but the underlying promise remained remarkably consistent:

Work could create opportunity.

As we celebrate Labor Day 2026—and as America moves through its 250th year—that idea deserves another look.

Because the workplace is changing.

Technology is changing it. Artificial intelligence is changing it. Remote work changed it. Inflation, higher operating costs, demographic shifts and a rapidly evolving economy are changing it.

But something else is happening at the same time.

The barriers between having a job and becoming an entrepreneur are becoming thinner than ever.

And that may create one of the most interesting periods for American entrepreneurship we’ve seen in generations.

The Past: America Was Built by People Who Worked—and People Who Took Risks

When we looked back at America’s early entrepreneurs in our America 250 series, one thing became clear:

They didn’t have an entrepreneurial ecosystem.

There were no online incorporation services.

No digital banking.

No Shopify.

No social media.

No Google.

Certainly no artificial intelligence capable of helping someone create a business plan over morning coffee.

There were farmers, tradespeople, merchants, printers, craftsmen, manufacturers and shopkeepers.

Many were simply trying to make a living.

Yet collectively they created businesses, industries and communities that helped build a country.

That’s an important part of the Labor Day story.

American labor and American entrepreneurship have always been connected.

Someone worked.

Someone learned.

Someone saw a better way.

And eventually, someone decided to build something of their own.

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There is no shortage of predictions about the future of work.

AI will eliminate jobs.

🔨 The Present: Work Is Being Redefined Again

AI will create jobs.

Remote work is ending.

Remote work changed everything.

Nobody wants to work.

People are working harder than ever.

Reality, as usual, is considerably more complicated.

The August employment report actually delivered an encouraging Labor Day headline: the U.S. added 162,000 jobs, while unemployment remained at 4.1%.

Small-business owners aren’t exactly retreating either. Recent NFIB data showed small-business optimism reaching an 11-month high, with hiring intentions increasing even as businesses continue struggling to find qualified workers.

But underneath those numbers, work itself is changing.

AI provides a perfect example.

Research from the U.S. Chamber Foundation found that half of workers at small businesses already use AI, primarily to increase productivity rather than eliminate human work.

And research released just this week by the Federal Reserve Bank of New York found something similar: AI adoption has risen sharply among the businesses it surveys, but widespread AI-driven layoffs have not materialized. Retraining existing workers has been a much more common response.

So perhaps we’re asking the wrong question.

Instead of:

“What jobs will technology eliminate?”

Maybe entrepreneurs should be asking:

“What new opportunities will technology make possible?”

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💡 The Future: The Smallest Business May Have the Biggest Opportunity

This is where Labor Day 2026 gets interesting.

For most of American history, building a company required resources.

Employees.

Office space.

Equipment.

Capital.

Specialized expertise.

Distribution.

Marketing.

Today, one person sitting at a kitchen table can access capabilities that would once have required an entire organization.

You can build a website.

Research a market.

Create advertising.

Analyze competitors.

Manage customers.

Sell nationwide.

Automate administrative work.

Develop products.

And increasingly, use AI as a force multiplier across nearly all of it.

That doesn’t guarantee success.

But it dramatically changes what one motivated person can attempt.

The entrepreneurial appetite is clearly still there. The U.S. Chamber notes that America has recorded more than 5 million new business applications every year since 2021.

That’s a remarkable number.

Millions of people are still looking at the world and saying:

Maybe I can build something.

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💰 But Opportunity Still Needs Discipline

That brings us back to another theme we’ve explored recently.

Starting a business has become easier.

Running one well hasn’t.

Your business can have money in the bank without all of that money actually being yours to spend.

Revenue isn’t profit.

Personal credit isn’t business credit.

Growth doesn’t automatically create healthy cash flow.

And having customers doesn’t necessarily mean you have a sustainable business.

In fact, today’s entrepreneur may need more financial discipline precisely because technology makes it possible to move so quickly.

The tools changed.

The fundamentals didn’t.

Know your numbers.

Protect your cash.

Build credit.

Understand your obligations.

Stay compliant.

Serve your customers.

Adapt.

Keep going.

Those principles would have sounded familiar to entrepreneurs 100—or even 250—years ago.

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🚪 The Employee and Entrepreneur Aren’t Opposites Anymore

There’s another shift worth recognizing this Labor Day.

We often talk about employees and entrepreneurs as though they live in two separate worlds.

Increasingly, they don’t.

Today’s entrepreneur might also be tomorrow’s employee.

Today’s employee might operate a weekend business.

A freelancer might eventually create an LLC.

A laid-off executive might become a consultant.

A tradesperson might start taking independent jobs.

Someone approaching retirement might finally build the business they’ve thought about for 20 years.

And someone working a perfectly good full-time job might simply decide:

I’d like to create something that’s mine.

Entrepreneurship doesn’t always begin with quitting your job.

Sometimes it begins with opening another door.

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From 1776 to 2026, the Tools Changed. The Instinct Didn’t.

That may be the thread connecting our America 250 series, our recent discussions about business credit and cash flow, and Labor Day.

The entrepreneur of 1776 and the entrepreneur of 2026 would barely recognize each other’s workplaces.

But they might recognize each other.

Both saw uncertainty.

Both saw risk.

Both had bills to pay.

Both probably wondered whether their idea would work.

And both eventually had to make the same decision:

Do I keep thinking about it—or do I start building it?

Technology will continue changing.

Jobs will continue changing.

Industries will disappear and new ones will emerge.

AI will become more capable.

The definition of a “workplace” may look completely different ten years from now.

But opportunity isn’t disappearing.

It’s moving.

And the people willing to learn, adapt, work and occasionally take a calculated risk will continue finding it.

That’s something worth remembering this Labor Day.

Happy Labor Day from MyUSACorporation.com

Here’s to the employees who keep businesses running.

The owners who sign the checks.

The entrepreneurs working after everyone else has gone home.

The people starting over.

The people starting something on the side.

And the people sitting somewhere this weekend thinking:

“Maybe it’s finally time to start.”

Because America’s next great small business is probably just an idea today.

And somebody still has to build it.

You Had the Money. Then You Spent It.

Why a Healthy Bank Balance Can Give Business Owners a Dangerous Sense of Security.

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You open your banking app Monday morning.

Business checking: $86,432.

That’s a pretty good feeling.

Maybe six months ago you were watching every deposit. Now sales are growing, customers are coming in, and there’s more than $86,000 sitting in the business bank account.

You’ve been putting off replacing a vehicle, so maybe now is the time.

You’ve needed another employee for months.

The website could use an overhaul.

Maybe you finally upgrade some equipment.

And after everything you’ve put into building the company, perhaps you take a little more money out for yourself.

None of those decisions sounds irresponsible.

After all, the money is sitting right there in the bank.

Except there’s a problem.

You may have $86,432 in your business bank account.

That doesn’t mean you have $86,432 to spend.

And learning the difference can be one of the most expensive lessons in entrepreneurship.

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Money in the Bank Doesn’t Mean Money to Spend

The problem with a bank balance is that it only tells you what’s in the account right now.

It doesn’t tell you what that money already needs to do.

Let’s stay with our $86,432 example.

Payroll is coming Friday.

That’s $18,000.

Payroll taxes will follow.

Another $5,400.

Workers’ compensation is due this month.

$3,800.

Insurance: $2,600.

Rent and utilities: $6,200.

Vendor invoices: $14,000.

Estimated taxes are approaching.

And you’d really like to maintain an operating reserve in case something unexpected happens.

Suddenly that $86,432 looks very different.

The money didn’t disappear.

It was already spoken for.

That’s a distinction every business owner eventually needs to understand.

Your bank shows you a balance.

You need to know your available cash.

Those aren’t necessarily the same thing.

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How Much Money Does Your Business Really Have?

This sounds like an incredibly simple question.

It isn’t.

If I ask a business owner how much money the company has, the natural response is to look at the bank account.

But imagine two businesses.

Company A has $100,000 in the bank.

Company B has $50,000.

Which company is financially stronger?

You can’t answer that without knowing what happens next.

Maybe Company A has $40,000 of payroll approaching, $20,000 owed to suppliers and a major tax payment coming.

Maybe Company B has virtually no debt, low overhead, a small payroll and customers who pay immediately.

The larger bank account doesn’t necessarily mean the stronger cash position.

That’s why managing a business by looking at the bank balance can be dangerously misleading.

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The Money May Be Yours—But the Obligation Is Too

There is an important distinction here.

Legally and technically, money sitting in your business account may belong to the business.

But financially, some of it may already have a destination.

Payroll is a perfect example.

Your employees haven’t been paid yet, so the money is still sitting in the account.

But would you really consider Friday’s payroll available money on Wednesday?

Of course not.

The same logic should apply to other known obligations.

You know the rent is coming.

You know payroll taxes are coming.

You know insurance premiums are coming.

You know vendors need to be paid.

And depending on your business and jurisdiction, some money you collect—such as certain taxes—may represent amounts you’re required to remit rather than ordinary operating funds.

The fact that the cash hasn’t left the account yet doesn’t mean it should be treated as available for something else.

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So What Happens When You Spend Money That’s Already Spoken For?

This is where the lesson gets expensive.

Let’s say our business owner sees that $86,432 balance and decides the company can comfortably afford a $20,000 purchase.

Maybe it’s equipment.

And perhaps it really is something the company needs.

The check clears.

Nothing terrible happens.

The business still has more than $66,000.

Then payroll hits.

Then payroll taxes.

Then insurance.

Then several vendors need payment.

Suddenly the cushion is disappearing.

But there’s good news.

A customer owes the company $27,000.

Their invoice was supposed to be paid Friday.

Friday comes.

Nothing.

Monday morning you send an email.

Tuesday afternoon you hear back:

“Sorry for the delay. We’ve submitted the invoice to accounting and expect payment next week.”

And there it is.

The moment when a seemingly healthy business starts chasing its own money.

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The Dominoes Start Falling

The owner probably doesn’t panic immediately.

They improvise.

That’s what entrepreneurs do.

Maybe a vendor payment gets pushed back a week.

Maybe a business credit card covers an expense that normally would have been paid in cash.

Maybe the company draws against a line of credit.

Perhaps the owner transfers personal money into the business.

One workaround isn’t necessarily catastrophic.

But then the customer payment is delayed again.

The credit card balance grows.

Another payroll arrives.

Another tax obligation appears.

Another vendor wants payment.

And gradually the company moves from using cash to managing shortages.

This is where otherwise profitable businesses can get themselves into serious trouble.

The underlying business might still be good.

Customers still want the product.

Revenue might actually be growing.

The income statement might even show a profit.

But none of those things make payroll Friday morning.

Cash does.

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Your Business Has Money—But How Much Can You Really Afford to Spend?

This is the better question.

Before making a significant expenditure, don’t just ask:

“Do we have the money?”

Ask:

“What does this money need to cover before more money reliably comes in?”

That changes the decision.

Suppose there’s $80,000 in the account and another $100,000 in accounts receivable.

On paper, that can look like a company with plenty of resources.

But receivables aren’t cash.

They’re promises to pay.

Some customers will pay tomorrow.

Some will pay in 30 days.

Some will pay late.

And occasionally, someone won’t pay at all.

Meanwhile, payroll doesn’t accept accounts receivable.

Neither does your landlord.

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There’s an irony here.

A small business owner with $5,000 in the bank tends to be extremely careful.

Every expense gets questioned.

Then the company grows.

Now $50,000, $100,000 or $250,000 might regularly move through the operating account.

The Bigger Your Business Gets, the More Deceptive the Number Can Become

That bigger number can create a sense of security.

But the obligations have probably grown too.

More revenue might mean more employees.

More employees mean more payroll.

More payroll means more payroll taxes and potentially more benefits, insurance and workers’ compensation costs.

More customers can require more inventory.

More inventory requires more supplier payments.

Growth can consume cash long before it generates cash.

So a larger bank balance doesn’t automatically mean you’ve earned the right to spend more freely.

Sometimes it means more money is moving through the business because more people are waiting to be paid.

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Give Your Money a Job Before You Spend It

You don’t necessarily need an elaborate financial system to begin thinking differently.

Start mentally dividing the business’s cash into categories.

Some money keeps the lights on.

Some covers payroll.

Some belongs to upcoming taxes.

Some pays vendors.

Some protects the company from emergencies.

Some funds future growth.

And then there’s the money that’s truly available.

You might physically separate some of those funds into different business accounts or use accounting and cash-management tools to track them. The exact system will depend on the company.

What’s important is the mindset.

Stop treating one large bank balance as one large pile of spendable money.

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Don’t Confuse Profit With Available Cash

This is another place entrepreneurs get tripped up.

Your accountant says:

“You had a profitable quarter.”

Excellent.

Then you look at your bank account and wonder:

“If we made that much money, where is it?”

Some may be sitting in accounts receivable.

Some may have gone toward inventory.

Some may have paid down debt.

Some may have been invested in equipment.

Some may be needed for taxes.

Profit and cash answer different questions.

Profit helps tell you whether the business model is economically working.

Cash tells you whether the company can meet its obligations today.

You need both.

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Your Cash Reserve Isn’t “Extra Money”

This deserves special attention.

Suppose you’ve worked hard to accumulate a $25,000 operating reserve.

Then you have a great month.

The operating account grows significantly.

It’s tempting to look at that reserve and think:

“We’re doing fine. We probably don’t need all of this sitting around.”

Until the truck breaks.

A major customer disappears.

Equipment fails.

Sales unexpectedly slow.

An insurance premium jumps.

Or three customers decide to pay late during the same month.

The reserve exists precisely because you don’t know what’s coming.

Emergency cash stops being emergency cash the moment you start treating it as ordinary spending money.

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Be Especially Careful With Taxes

Taxes create their own version of the bank-balance illusion.

Money may accumulate in the operating account throughout the month or quarter while the corresponding tax obligation hasn’t yet been paid.

That can make the business look temporarily richer than it is.

This is particularly dangerous when an owner uses money reserved for tax obligations to solve another short-term cash problem.

Now one problem has become two.

Depending on the type of tax and circumstances, failing to properly collect, deposit or remit required taxes can also create consequences far beyond an ordinary late vendor payment.

When money is intended for taxes, treat it accordingly.

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Business Credit Can Help—But It Can’t Fix the Underlying Problem

This connects directly to our previous discussion about building business credit.

A line of credit can be extremely useful when timing creates a temporary gap.

Imagine a reliable customer normally pays in 30 days but unexpectedly takes 45.

A well-managed business line of credit may help bridge that short-term difference.

That’s very different from using debt every month because the company continually spends cash needed for upcoming obligations.

Credit can solve a timing problem.

It cannot indefinitely solve a cash-management problem.

If you’re borrowing every month to make payroll, it’s time to look deeper.

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Before You Spend $20,000, Look 60 Days Ahead

This might be the simplest practical habit in this entire article.

Don’t only look at today’s bank balance.

Look forward.

What’s due next week?

What’s due next month?

When is payroll?

When are taxes due?

Which insurance premiums are approaching?

What major vendor bills are outstanding?

What customer payments are expected?

And here’s the important part:

How confident are you that those customer payments will actually arrive when expected?

Now ask whether that $20,000 purchase still feels comfortable.

Maybe it does.

Great.

Spend it confidently.

Maybe you decide to wait two weeks.

Maybe you finance part of the purchase instead.

Maybe you discover you don’t have nearly as much available cash as the bank account suggested.

That’s not bad news.

That’s good financial management.

You found the problem before you spent the money.

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The Bank Balance Doesn’t Tell the Whole Story

Entrepreneurship changes your relationship with money.

When you’re looking at a personal checking account, the balance generally gives you a reasonable idea of what you have available, subject to your upcoming personal obligations.

A business account can be very different.

Thousands—or hundreds of thousands—of dollars can pass through it while only a fraction represents genuinely discretionary cash.

That’s why experienced business owners eventually stop getting overly excited by a large balance.

They start asking better questions.

What’s committed?

What’s coming due?

What’s coming in?

What’s late?

What’s reserved?

And after all of that…

what’s actually available?

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Final Thoughts: Know What Your Business Can Really Afford

Having money in the bank is a good thing.

Building cash reserves is even better.

But financial strength doesn’t come from simply accumulating a large number on a banking screen.

It comes from understanding what that number means.

Your business might have $86,432 in its account.

That doesn’t necessarily mean you’re broke.

And it certainly doesn’t mean you shouldn’t invest in employees, equipment, marketing or growth.

It simply means you need to know which dollars already have a job before you give them another one.

Because spending money that’s already spoken for can start a chain reaction:

A vendor gets delayed.

Then a credit card gets used.

Then a customer pays late.

Then payroll gets uncomfortable.

Then a line of credit becomes necessary.

And suddenly a company that appeared flush with cash is scrambling to stay ahead.

The lesson isn’t to be afraid of spending money.

It’s to understand the difference between money in the bank and money available to spend.

So the next time you open your business banking app and see a healthy balance, enjoy it.

Then ask yourself one more question:

How much of that money is really ours to spend?

That answer—not the number displayed at the top of the screen—is a much better measure of your company’s financial flexibility.

Building a Business Means Building Financial Discipline

Forming an LLC or corporation creates the legal foundation for a business. Obtaining an EIN, establishing a business bank account and building business credit help create its financial identity.

But as the company grows, another skill becomes just as important:

learning how to manage the money the business creates.

MyUSACorporation helps entrepreneurs establish the foundation for doing business in the United States—from business formation and EIN services to the tools and information needed to build a stronger company.

Start the business correctly. Build its financial identity. Then protect the cash that keeps it moving.