A small business (Kleinunternehmer) is a Freiberufler or Gewerbe with a revenue of less than 22,000€ in the first year, and less than 50,000€ in the following years1, 2. Note that this is revenue (Umsatz), not profit (Gewinn). The law that defines small businesses is called the Kleinunternehmerregelung.

The main benefit of being a Kleinunternehmer is that you have less paperwork, and you don't need to charge VAT to your customers1.

For more details, see this guide.