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Lecture 1-1

The document provides information about small and medium enterprises (SMEs). It defines SMEs as businesses with less than 50 employees for small enterprises and less than 250 employees for medium enterprises. SMEs play an important role in economies by employing many people and driving innovation. While SMEs face challenges like limited resources and vulnerability during downturns, they also provide flexible jobs and contribute to economic growth. The document outlines the traditional forms of SME ownership in Pakistan including sole proprietorships, partnerships, and limited liability companies.

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Anwar Ali
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11 views

Lecture 1-1

The document provides information about small and medium enterprises (SMEs). It defines SMEs as businesses with less than 50 employees for small enterprises and less than 250 employees for medium enterprises. SMEs play an important role in economies by employing many people and driving innovation. While SMEs face challenges like limited resources and vulnerability during downturns, they also provide flexible jobs and contribute to economic growth. The document outlines the traditional forms of SME ownership in Pakistan including sole proprietorships, partnerships, and limited liability companies.

Uploaded by

Anwar Ali
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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SMALL AND MEDIUM ENTERPRISES

LECTURE 1
COURSE INSTRUCTOR: MS. SAMEEN FATIMA
MARKS ALLOCATION:

Distribution:

Sessional Marks Breakdown: 40


Attendance 10
Quizzes (Maximum 3 - Best 2 will count) 10
Class Participation 5
Project and Presentation 15
Final Exam 60
Total: 100
WHAT IS AN ENTERPRISE?

THINK THEN ANSWER


“An enterprise is a company or business, often a small one. it is most often
associated with entrepreneurial ventures”.
WHY ENTREPRENEURSHIP?

Entrepreneurs usually start an enterprise with the associated risks to make a profit, and for one of
several reasons:
 Problem-solving: They see a particular issue that they feel they can solve.
 Exploit ideas :They have a new idea or product they believe will be successful.
 Filling a gap: They see a gap in the market they believe they can fill.
 Competitive pricing: They believe they can produce something on the market cheaper and offer it at a
lower price.
 Knowledge-based: Where they believe they can supply specialist knowledge that customers will pay
for.
“Small and medium enterprises (SMES) are businesses that maintain revenue, assets,
or a number of employees below a certain threshold. Each country has its own
definition of what constitutes a small and midsize enterprise. SMEs play an
important role in an economy, employing vast numbers of people and helping to
shape innovation.”.

SMALL AND MEDIUM ENTERPRISES DEFINED


EXPLANATION:

Small-size enterprises are companies with fewer than 50 employees, and medium-size enterprises
are ones with fewer than 250 employees.
Small Medium Enterprise (SME) is a business entity which does not employ more than 50 persons
and annual sales turnover is up to Rs. 150 million. less than 100 employees in case of trading
establishments- State Bank of Pakistan.
Categories:
1. Microenterprises: 1 to 9 employees.
2. Small enterprises: 10 to 49 employees.
3. Medium-sized enterprises: 50 to 250 employees.
4. Large enterprises: 250 employees or more.
GROWING IMPORTANCE OF SMES

SMEs serve as a source of entrepreneur skills, innovation and employment, also they stimulate
competition for prices, product design and efficiency. They play a vital role in the country’s overall
economical well-being by widespread production networks and they are core to the economic growth of
developing countries.
1. Favors flexibility and innovation
2. Creates a more competitive and healthier economy
3. Assists big enterprises
4. Creates job opportunities locally
5. Diversify options for the community
CHALLENGING OPPORTUNITIES IN SMES:

 SMEs have a over-all competitive structure.


 SMEs cater the new demands in market and use of technology in a flexible way.
 SMEs‘ working styles are not monotonous or repetitive.
 Employees get a thorough exposure of learning through rotations.
 SMEs have a more successful role in increasing employment and arranging income
CHALLENGING OPPORTUNITIES:

 SMEs are vulnerable to pandemics, hence their survival gets on stake with even small changes in
economy.
 SMEs face sudden consequences of unfavorable government regulations and decisions.
 They have limited resources available as compare to large firms.
 They have a weaker financial structure (i.e. lower capitalization).
 They have a high risk of dissolution in case of recession.
 They are heavily dependent on credit and they have fewer financing options.
WHAT ARE THE 4 TYPES OF ENTERPRISES?

• Sole Proprietorship: A business owned and operated by one individual.


• Partnership: A business owned by two or more people.
• Corporation: An independent legal entity owned by shareholders who are not
personally liable for the company's debts or liabilities.
• Limited Liability Company (LLC): A hybrid business structure that combines the
benefits of a corporation with the flexibility of a partnership or sole proprietorship.
TRADITIONAL SMES IN PAKISTAN

Association of Persons (AOP) Limited Liability Partnership

Legal Status Not a Separate Legal Entity Separate Legal Entity


Liability Limit Unlimited Liability Limited Liability
Taxation Single Taxation Layer Single Taxation Layer
Cost to Administrate Higher Cost of Forming and Low Cost of Forming LLP; means
Maintaining Partnership that Cost of Maintaining the LLP is
higher than AOP but lower than a
Private Limited Company
FORMS OF OWNERSHIPS OF SMALL BUSINESSES IN PAKISTAN
Business Types Sole Proprietor Partnership NGOs / NPOs Limited Liability
Company
How many members Only One From 2 to maximum up to Minimum three members Pvt. Ltd: 1 to 50
required to form 20 partners Public Ltd: No limit

Procedure to form Registration with Federal Registration with Registrar Registration with Securities Registration with Securities
Board of Revenue (FBR) of Firms & Exchange Commission of & Exchange Commission of
Pakistan (SECP) Pakistan (SECP)

Personal liability Not limited Not limited Yes Yes

Duration Until withdrawal or death of At Will Unlimited Unlimited


owner
Tax Implementation Yes Yes Tax Exemption may be Yes Corporate Tax Apply
obtained
Ability to raise capital ot as separate entity Yes, from partners only Yes, through donations and Yes
grants

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