A small enterprise is an enterprise where the investment in plant and machinery is more than

Rs. 25 lakh but does not exceed Rs. 5 crore; A medium enterprise is an enterprise where the
investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

Definition:

. The definition of small-scale industry (SSI) varies from one country to another and from one
time to another in the same country depending upon the pattern and stage of development.

Government policy and administrative set up of the particular country. As a result, there are at
least 50 different definitions of SSIs found and used in 75 countries (GIT 1955). All these
definitions either relate to capital or employment or both or any other criteria. Let us trace out the
evolution of the legal concept of small-scale industry in India.

The Fiscal Commission, 1950 (GOI 1950), for the first time, defined a small- scale industry as
one which is operated mainly with hired labour usually 10 to 50 hands. In order to promote
small-scale industries in the country, the Government of India set up the Central Small-Scale
Industries Organisation and the Small- Scale Industries Board (SSIB) in 1954-55.

The SSI Board at its first meeting held on January 5th and 6th 1955, defined small-scale industry
as a unit employing less than 50 employees, if using power, and less than 100 employees without
the use of power and with a capital asset not exceeding? 5 lakhs.

Lower Revenue and Profitability

Small-scale business revenue is generally lower than companies that operate on a larger scale.
The Small Business Administration classifies small businesses as companies that bring in less
than a specific amount of revenue, depending on the business type. The maximum revenue
allowance for the small business designation is set at $21.5 million per year for service
businesses.

Lower revenue does not necessarily translate into lower profitability. Established small-scale
businesses often own their facilities and equipment outright, which, in addition to other factors,
helps to keep costs lower than more leveraged businesses.

Smaller Teams of Employees

Small-scale businesses employ smaller teams of employees than companies that operate on
larger scales. The smallest businesses are run entirely by single individuals or small teams. A
larger small-scale business can often get away with employing fewer than one hundred
employees, depending on the business type.

Small Market Area

Small-scale businesses serve a much smaller area than corporations or larger private businesses.
The smallest-scale businesses serve single communities, such as a convenience store in a rural
township. The very definition of small-scale prevents these companies from serving areas much
larger than a local area, since growing beyond that would increase the scale of a small business's
operations and push it into a new classification.

Sole or Partnership Ownership and Taxes

The corporate form of business organization is not well-suited to small-scale operations. Instead,
small-scale businesses prefer to organize as sole proprietorships, partnerships or limited liability
companies. These forms of organization provide the greatest degree of managerial control for
company owners, while minimizing the hassle and expense of business registration.

These businesses generally do not file their own taxes; instead, company owners report business
income and expenses on their personal tax returns.

Limited Area of Fewer Locations

A small-scale business, by definition, can be found only in a limited area. These companies are
not likely to have sales outlets in multiple states or countries, for example. A large number of
small-scale businesses operate from a single office, retail store or service outlet. It is even
possible to run a small business directly out of your home, without any company facilities.