SME - Small and Medium-sized Enterprises?

[allsorts]

SME - Small and Medium-sized Enterprises?

I am fairly new to business and this is a grey area that I would like to have clarified. I have a couple of questions on the subject and would appreciate it if anyone can help me out:

What is the definition of an SME? (besides abbreviation)

What is the criteria for a business to be classified as a SME?

What are the benefits for my business to be classified as a SME?

Can any type of business be classified as a SME?

Where can I read some legislation on the subject?

Is there a set out framework for classifying enterprises, and where can I find it?

[Dave A]

There are different definitions on a variety of fronts.

To kick this off, there's SARS' view for the purpose of qualifying for small business corporation tax benefits.

For generic broad-based BEE scorecard purposes, the SME range is R5 million to R35 million.

There's also a generic DTI classification of micro, small, medium and large businesses, but I can't find the table just at the moment.

[allsorts]

SARS does not have one single description for small business; instead there are several definitions utilised for different purposes:

For Amnesty purposes, a small business is any business with a turnover of up to R10m;

For Income Tax purposes (Section 12E), a Small Business Corporation (SBC) is defined as a business having a turnover of less than R14m, over and above other qualifying criteria.

For Capital Gains Tax, a Small and medium Enterprise (SME) is described as a business having total net assets of under R5m.

It is therefore proposed that SARS restricts itself to the definition as used for SBC regime purposes – i.e. a small business is a business that has a turnover of no more than R14 million. The National Small Business Office (NSBO) therefore operates within the ambit and interests of businesses in South Africa with a turnover of no more than R14m per annum.

[Dave A]

No wonder tax is so complicated.

[allsorts]

The DTI classifies SMEs in the following way

Small establishments 20 – 49 employees
Medium-sized establishments 50 – 199 employees.

[Frankincense]

@ allsorts:

"I am fairly new to business and this is a grey area that I would like to have clarified. I have a couple of questions on the subject and would appreciate it if anyone can help me out"

All the various playas ie. SARS, DTI, Customs, Banks etc have their own
(1) definitions
(2) benefits
(3) classification criteria
(4) Other
and within those (4) and more, their own individual tax application rules for each individual event be it CGT, Amnesty, Income tax etc etc...

"Is there a set out framework for classifying enterprises"

- Yes, but not only one! ....they are endless depends who you are "dealing" with

"and where can I find it" - refer to each individual playa's back yard...nudge nudge wink wink....you're doing well so far ....stuck in the web!!!

Personally, SME is just a name given to the small fish in an ocean of giant fish with some tax relief and procurement benefits via BEE dreams to provide "virtual" hope to those who wanna be a big fish.......

Catch ..big fish eat small fish.

I have to ask, what is your actual concern, ultimate goal?

[allsorts]

@ Francois

Firstly, I would like to thank you for posting on my ‘post?’ the information you have provided has helped me and your opinion has created some insight to.

"I have to ask, what is your actual concern, ultimate goal?"

I am planning to launch a new business venture early next year and this time around I am doing some research about how things work, to compile a bit of knowledge that would hopefully give me a more comprehensive understanding of to run this venture on the business/admin side. Hopefully it will allow me to focus more on the actual ‘product’ when the business is running.

[AmithS]

I was wondering about this today!

What turnover makes a small business and medium business?

Does anyone have information different from above, or is Daves small business < R5mil and medium business >R5mil <R35mil the way to go?

[wynn]

A SME is just a small 'big' business
At least that is the way it seams if you are a 'solopreneur' and I am sure 'Gubbimint' thinks that way too.
In a big business you have an admin department, a sales department and a development department in a small business you have to do the same admin, sales and development yourself so there is no time to make money

[geraldenek]

please note that a sbc is not the same as an sme - most companies are sme's and financials is also compiled using IFRS for SME's.

According to IFRS SME's are defined as entities that:

Do not have public accountability and publish general prupose financial statements for external users examples: owners who are not involved in managing the business, existing and potential creditors and credit rating agencies

An enitity has public acountability if:
it debt or equity insturments are traded in a public market or it is in the process of issuing such instruments or it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primare businesses.

Some entities which hold assets in a fiduciary capacity for reasons incidental to a primary business are not consedered to be publicly accountable e.g. travel or real estate agenst, schools, charitable organizations, co-operative enterprises requiring a membership deposits and sellers that receive payment in advance of delivery of the goods or servies.

Here is a link with some Q&A

[Dave A]

What turnover makes a small business and medium business?

Does anyone have information different from above, or is Daves small business < R5mil and medium business >R5mil <R35mil the way to go?

It really depends whom you're trying to satisfy. That particular definition applies to B-BBEE, but as the rest of the posts show, there are many different definitions out there.

[Justloadit]

The turnover value as a value for deciding what business size you are is not a true reflection. I have 10 employees, and a turn over of R35mil, 98% of my turnover is the cost of the product I am selling, because of the nature of business that I am in. My bottom line is in the order of a small business doing less than R5m a year

[Blurock]

The difference in Small and Medium also depends on the number of employees. The turnover figure of R5-R35 mil for Medium business is widely accepted, although as said, the application may vary.