Ownership Patterns of Micro, Small and Medium enterprise

14/09/2022 0 By indiafreenotes

Following the MSMED Act, 2006, the Micro Small and Medium Enterprises (MSME) enterprises are classified into the following two types.

  • Manufacturing enterprises: The enterprises which engaged in the manufacturing or production of goods are known as manufacturing enterprises
  • Service enterprises: The units which engaged in providing or rendering services are stated as service enterprises
Composite Criteria: Investment in Plant / Machinery and Turnover
Type of Enterprises Investment Turnover
1 Micro enterprises Less than Rs.1 Crore Less than Rs.5 Crore
2 Small enterprises Less than Rs.10 Crore Less than Rs.50 Crore
3 Medium enterprises Less than Rs.20 Crore Less than Rs.100 Crore

Composite Criteria: Investment in Plant and Machinery
Type of Enterprises Manufacturing enterprises Service enterprises
1 Micro enterprises Less than or Equal to Rs.25 Lakhs Less than or Equal to Rs.10 Lakhs
2 Small enterprises Rs.25 lakhs to Rs.5 Crore Rs.10 lakhs to Rs.2 Crore
3 Medium enterprises Rs.5 Crore to Rs.10 Crore Rs.2 Crore to Rs.5 Crore

Essentially, family partnership is akin to proprietorship. In fact, the two forms are so intermingled with each other that they cannot be differentiated from each other as these two categories are practically family concerns by virtue of the ownership and management structure. Therefore, we have lumped them together under one category, i.e. sole proprietorship. Similarly, cooperatives are lumped with company. After this, we find the following pattern of business ownership used in micro and small-scale enterprises in India.

Ownership Pattern Percentage
Sole Proprietorship 87.46
Partnership 11.68
Company 00.86
Total 100.00

Ownership Pattern

It is seen from above that the ownership pattern in micro and small-scale enterprises in India is highly lopsided skewed in favour of sole proprietorship.

Highly Lopsided Ownership Structure

Individual research studies also report similar lopsided ownership structure skewed in favour of proprietorship enterprises is indicated by its 87% share in all. That proprietorship is the most popular form of ownership structure in small enterprises. Out of every 10 small enterprises, 9 belong to proprietorship form of business ownership. This is attributed to simplicity in their establishment. Partnership is the second largest form of ownership after proprietor.

As regards the company form of ownership, it is almost non-existent in micro and small- scale enterprises. The reason is not difficult to seek. Establishment of company form of organisation involves cumbersome and complex procedure as compared to proprietorship and partnership forms of business organization.