Economic Contributions of Small Business

Topics: Small business, Stock exchange, Business Pages: 7 (1647 words) Published: January 9, 2014
Micro, small, medium enterprises defined
Micro, small, and medium enterprises (MSMEs) are defined as any business activity/enterprise engaged in industry, agri-business/services, whether single proprietorship, cooperative, partnership, or corporation. MSMEs have value falling under the following categories:

By Asset*:

Up to P3,000,000
P3,000,001 to P15,000,000
P5,000,001 to 100,000,000
Above 100,000,00

This table shows that in a small business it should have P3, 000,001 to P15, 000,000 asset/capital to start your own business and to maintain its operations.

By of employees:
1 – 9 employees
10 – 99 employees
100 – 199 employees
More than 200 employees

This table shows that in a small business that it only takes 10 – 99 employees needed to operate your business, and it is not that costly unlike the medium and large businesses.

*As defined under Small and Medium Enterprise Development (SMED) Council Resolution No. 01 Series of 2003 dated 16 January 2003

Small Businesses to the Economy

In many countries, small businesses contribute greatly into their economy. Most of the large businesses in many countries started as a small business. They contribute to the society by selling their products to customers, products that people need. They also provide employment opportunities to people, which can become reasonable career paths and choices. And it could give people experiences, education, and training to make their own businesses.

There are many type of small business, these include:

Sole Trader
A sole trader, also known as a sole proprietor only has one owner. The owner makes all the decisions and is fully responsible for the firm and they are also liable for all debts. The business has the same legal identity as its owner and if the firm cannot meet its debts, the owner must sell his/her personal assets. A sole trader’s business is more confidential and organisation is simple, establishing a business as a sole trader can also be relatively cheap and the owner will have sole entitlement to their business’s capital and profit. Because the owner and the business have the same identity, only one tax return form has to be filled out. Unfortunately, a sole trader has to look after all aspects of the business from the quality of the service or products, to financial planning, to taxation and marketing. In other words, more commitment is needed to run a sole trader business, as there is little time for days off or holidays.

A partnership usually involves two or more people agreeing to run a business together. It is possible for a business to have up to twenty partners in it, and these partners may or may not have equal rights, and it is even possible for one partner to not contribute to the actual running of the business. This is known as a silent partner. The partnership is not taxed because it is not a separate entity from the actual partners, who are liable for all debts and losses to the business. For the partnership to be made, a partnership agreement is created. This document outlines the roles of each partner and their rights to the business. Partnerships can also be relatively inexpensive to set up, because there are more people within the business, there can be a wider range of skills and sources of capital availability are greater, decision making is shared and there may also be some tax advantages. Unfortunately, partners may not always agree on certain issues and each partner is liable for the business actions of other partners. Also, profits must be shared and a partner cannot sell their share of the business unless an agreement is made with the rest of the partners.

A company is much more expensive than a partnership, both to establish and operate. A company is formed when a number of people or, firms, combine...
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