SME

SME

SME is the abbreviation for Small-to-medium enterprise. A company is an SME if it has less than 50 employees. A company might also be considered to be small-to-medium if it can satisfy at least one of the following criteria: A turnover of not more than 7 million euros (£4,487,663.41); a balance sheet total of not more than 5 million euros (£3,205,295.67); not more than 25% of the capital or voting rights by (one or jointly) enterprise not satisfying the same criteria.

If a company meets the criteria outlined above it is defined as a 'Small Sized Company' so included in the classification. If a company has 50-249 employees and satisfies at least one of the following criteria it might also come under the SME banner.

A turnover of not more than 40 million euros (£25,642,365.33); a balance sheet total of not more than 27 million euros (£17,309,240.28); not more than 25% of the capital or voting rights by (one or jointly) enterprise not satisfying the same criteria. In this instance it would be classified as a 'Medium sized company' so included in the classification for small to medium enterprises for that reason.

If the company has more than 250 employees it will be considered to be a 'Large company' so not included in the classification for SME. The Small Business Service, the agency within Government championing small businesses, recently published headline statistics for the year 2001 with regard to SMEs in the UK.

It is estimated that there were 3.7 million active businesses in the UK at the start of 2001, with a small increase on 2000 figures. There are generally two types of small to medium sized limited company - those that are publicly traded (known as a public limited company or plc) and those that are privately owned (identified by the abbreviation Ltd at the end of their name).

The term limited refers to limited liability and there are around 1.7 million in the UK. If you're a sole trader or partner, you can be held personally liable for it - outstanding debts can be met from your personal assets. Limited companies however can be small or medium size but is a separate legal entity and can own property, incur debts, sue and be sued.

Any business dealings are made on behalf of the company, rather than a person even if that person is thought of as being an SME. It's owners are liable only for the amount invested. You must have at least one director to manage the business and a company secretary to make sure all the rules are followed and official records maintained. In most cases, because they are by definition small, SMEs are privately owned.