It's Big Awesome Savings time
Need help choosing a plan?
Created with Sketch. 1800 917 771 Schedule a call
Need help?
We're here for you.
Schedule call
Created with Sketch.
Business owner packaging a delivery for a client
Starting a business

What’s the difference between micro-businesses and small businesses?

If your business runs on an extremely small scale, you may actually be considered a micro-business. This smaller classification of a small business means you operate with a very minimal amount of staff, receipts and business activity. Although the difference in classification may not seem too important, there are a number of things to keep in mind if you do operate a micro-business.

Micro-business vs small business

All micro-businesses are small businesses. The only difference is a micro-business is a subset of the small-business community based on the number of employees within the company. While your company can technically be considered a small business even if it has dozens of employees, your business is a micro-business if you employ less than six people. If you are a sole trader, self-employed or have no employees, you operate a micro-business. There are other guidelines that can also define whether your company is micro or small. If your company required less than $50,000 to start or if your company does not access traditional capital loans, you are running a micro-business.

Challenges of micro-businesses

A micro-business faces additional challenges that other businesses, including larger small businesses, do not face. You will have a harder time hiring employees and drawing in talent because of your lack of exposure. For the same reason, micro-businesses do not have the same customer reach as larger companies. Traditional financial institutions may refuse to issue loans if your business is too small. Micro-businesses have a harder time developing lines of credit with suppliers because of the increased risk of default.

Grow Your Business with QuickBooks

Micro-business taxation

The taxes you pay on the earnings of your micro-business are potentially not treated too differently than any other small business. If you incorporate your business, it is taxed at company tax rates. If you choose to operate as a sole trader, you are taxed at your personal tax rate. Most micro-businesses are more likely to operate under this structure because it takes less effort to register and file paperwork, but the business structure you choose for your micro-business, or any small business, changes the way your taxes are assessed.


Micro-businesses are in a unique position regarding cloud payroll software. You may have a few employees which requires you to perform payroll functions and pay required payroll taxes. But you may not have enough employees to warrant a large-scale payroll system or reporting system. Your micro-business is better-suited to a flexible system that doesn’t require a lot of setup. As your business grows, having a larger infrastructure becomes more important, but it’s hard to justify a large-scale implementation for a minimal need.

Cost-cutting while maximising revenue

Your micro-business will have different operating goals than a larger business. It will have fewer expenses than a larger company. Because of this, your goal should be to increase revenue. While many businesses try to cut costs, your costs are probably already low. As such, a major difference between a micro-business and a small business is the way the micro-business improves its bottom line. Bigger companies can trim operations. Micro-businesses must grow them. A micro-business may just be a specific type of small business, but it faces unique challenges that force it to operate in different ways to other companies.

Related Articles

Looking for something else?

Get QuickBooks

Smart features made for your business. We've got you covered.

Help Me Choose

Use our product selector to find the best accounting software for you.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.

Stay up-to-date with the latest small business insights and trends!

Sign up for our quarterly newsletter and receive educational and interesting content straight to your inbox.

Want more? Visit our tools and templates!

By signing up you are agreeing to our terms and privacy policy.

A person is smiling and holding a laptop.