Understanding the Small Business $6 Million Asset Test: Is Your Business Eligible?
Small businesses play a crucial role in the state’s economy, with their contribution towards its growth and development being immense. The state government recognizes the importance of small businesses and provides several grants and loans to help them flourish. However, to be eligible for these grants, businesses must fulfill certain criteria. One of the most crucial criteria is meeting the ‘Small Business $6 Million Asset Test’. This test is essential to determine if a business is small enough to be eligible for the grant. In this article, we will delve deep into understanding this asset test and how it is calculated.
What is the Small Business $6 Million Asset Test?
The Small Business $6 Million Asset Test limits the total net value of a business’s assets to $6 million or less to qualify as a small business. This means that a business must have a total asset value of $6 million or less, including its subsidiaries, associates, and entities in which it has a stake.
How is the Asset Test Calculated?
Calculating the asset value is not as simple as just adding the value of all the assets. The asset value is calculated as:
Total Assets = Total Liabilities + Owners’ Equity
While calculating the asset value, it is important to keep in mind that only assets held for business purposes are considered. Assets held for personal use, like a personal car, are not included in the calculation. Similarly, liabilities include only those obligations that pertain to the business and not personal liabilities of the owners.
Exceptions to the Asset Test
There are exceptions to the asset test that allow businesses with assets over $6 million to still qualify as a small business for grants and loans. Certain businesses in the primary production sector, such as farming or fishing, can have total net assets of up to $25 million and still be considered a small business. The reason behind this exception is the high capital requirement for businesses in the primary production sector.
Conclusion
The Small Business $6 Million Asset Test is a critical criterion for businesses to fulfill if they want to qualify for grants and loans provided by the state government. The asset test is calculated based on the total asset value of the business, and only assets held for business purposes are considered. While this can seem like a daunting task, there are exceptions to the asset test that allow businesses to qualify as small businesses even if they have assets above $6 million. Therefore, small businesses should ensure that they meet the criteria to be eligible for the various grants and loans provided by the state government.
