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Small Business

Reviewed by Sujaini | Updated on Oct 05, 2020

Catalogue

Introduction

Small and mid-size enterprises (SMEs) are businesses that maintain revenues, assets or a number of employees below a certain threshold. Each country has its own definition of what constitutes a small and medium-sized enterprise (SME). Certain size criteria must be met and occasionally the industry in which the company operates in is taken into account as well.

Why is Small Business important?

Many people in emerging economies find work in small and mid-size enterprises (SMEs). SMEs contribute roughly 45% of total employment and 33% of GDP in these countries, according to the Organisation for Economic Co-operation and Development (OCED).

Summary of the news

When it comes to tax reporting, the Internal Revenue Service (IRS) does not categorize businesses into SMEs. Instead, it separates small businesses and self-employed individuals into one group and large to mid-size businesses into another.

The IRS classifies small businesses as companies with assets of $10 million or less and large businesses as those with over $10 million in assets.

Future Impact

Life as a small and mid-size enterprise (SME) isn’t always easy though. These businesses generally struggle to attract capital to fund their endeavors and often have difficulty paying taxes and meeting regulatory compliance obligations.

Governments recognize the importance of small and mid-size enterprises (SMEs) in the economy and regularly offer incentives, including favorable tax treatment and better access to loans, to help keep them in business.

Related Terms

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