What is a Solo Professional?

You’ve printed your business cards, set up your website and sent out a few marketing emails and effectively have told your friends and family that you are in business for yourself.  But what you are as a business is partly defined by which government agency is compiling data about your work activities.

I believe that’s why there are a lot of terms that bandied about to define a solo professional.  Some of the most popular terms can include freelancer, independent contractor, solopreneur or consultant. And of course,  the latest term is solo professional.

According to the US Bureau Labor of Statistics, there were over 22.11 million solo professionals in the United States in 2010.  However, they are officially known as “nonemployer businesses” .

A business officially must meet the following three criteria to be considered a nonemployer business:

• It must have no paid employees (beyond the owner).
• Its annual business receipts must be at least $1,000.
• It must be subject to federal income taxes.

The nonemployer businesses are further broken down into 20 broad job categories.  This definition than includes a wide range of employment ranging  from a pushcart vendor, to a virtual assistant, to graphic designers, to photographers, to writers, to coaches and educational and legal consultants.  Incomes can range from the minimum of $1,000 to a cool $5 million.   All these businesses fall under nonemployer businesses as long as they meet the rest of the criteria.  In the recent economic downturn, it’s not surprising that many of these solopreneurs have contributed to growth in this area.

Interestingly  enough, while most of these professionals are running a business, sell products to customers or provide services for clients, they do not officially fall into the Small Business Administration’s (SBA) official definition of a small business.  A term many people confuse with entrepreneurs or solo professionals.

According to the SBA, they define a small business as one that is independently owned and operated, is organized for profit, and is not dominant in its field.

Depending on the industry, size standard eligibility is based on the average number of employees for the preceding twelve months or on sales volume averaged over a three-year period. The definition is further broken down by industry.

Examples of SBA general size standards include the following:

•  Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;
•  Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided;
•  Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided;
•  Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided;
•  General and Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction;

So, a solo professional usually begins in the “nonemployer business” status and if the business grows (and hopefully it does) it then graduates to the official small business designation.