What is small and medium-sized enterprises (SMEs)’
Small and medium enterprises are businesses that support the income, assets or number of employees below a certain threshold. In each country or economic organization has their own definition of what is small and medium enterprises. In the US, there is no precise way of defining SME, but also in the European Union small businesses are companies employing less than 50 employees, while medium-sized enterprise with number of employees less than 250. In addition to small and medium size companies, there are a few micro-companies, employing up to 10 employees.
Penetration of small and medium enterprises (SMEs)’
The abbreviation “SME” is often used by the European Union, the United Nations and the world trade organization (WTO). In the United States, this is often called small and medium business(SMB). Since the requirements for the categories differ from country to country, so the names and abbreviations. For example, in Kenya, it’s MSME micro, small and medium-sized enterprises, and in India, the MSMED micro, small and medium enterprises. Despite the differences in nomenclature, they share the commonality of separation of enterprises depending on size or structure.
SMEs, strong in innovation, and they promote competition. However, these companies seek to raise capital to Fund their endeavors. For stability, some national governments and international organizations are implementing programs of business education and improving the access of small and medium enterprises to credit and state incentives.
The role of SMEs in people to work
Small and medium-sized enterprises (SMEs)play an important role in countries with developing economies. SMEs create 80% of new jobs in emerging economies. In addition, most people with jobs in the formal sector of developing economies of these countries to find work in SMEs. More than half of SMEs have no access to capital to fuel growth. They usually rely on personal funds and loans from friends or family, known as angel investors than traditional loans.
The importance of SMEs is not confined to developing countries. Between 2002 and 2012, SMEs created 77% of new jobs in Canada, almost the same percentage as in most countries with developing economies. These institutions are very important for the welfare of the country, both from the point of view of creating jobs and generate tax revenues. However, small and medium enterprises, tend to have low survival rates, and in some cases, they do not comply with the tax reporting laws for several reasons. To fix these types of issues, Canada and many other countries have implemented programs to train owners of small and medium businesses On making their business grow and survive. They also have special audit programs to target high-risk areas and improve tax compliance.
SMEs in the United States
From the point of view of tax reporting, the IRS does not classify enterprises into SMEs. Instead, it separates small business and self-employed persons in the same group, and large and medium-sized businesses in the other. The IRS klassificeret small business as companies with assets of $10 million or less, and large companies with more than $ 10 million in assets. Small business administration (SBA) klassificeret small business in its industry, ownership structure, number of employees and profits. As the European Union, the United States clearly klassificeret enterprises with less than 10 employees as small office/home office (SOHO).