SME definition

The EU's SME test has two parts, and both must hold: fewer than 250 staff, AND either annual turnover of at most €50 million or a balance sheet total of at most €43 million. Note the AND and the OR. A company with 300 employees is not an SME however small its turnover.

The trap is that the figures are not your company's alone. Ownership links pull other companies' staff and finances into your count. An AUTONOMOUS enterprise counts only itself. A PARTNER enterprise (where another company holds between 25% and 50%) adds a proportional share of that company's figures. A LINKED enterprise (over 50%, or effective control by other means) adds the whole of it.

This is what disqualifies venture-backed start-ups. A firm of twelve people majority-owned by a fund that also controls larger companies can consolidate its way past 250 employees without ever hiring anyone. Investors typically know this; founders typically do not until the validation service asks for the ownership chain.

Staff are counted in annual work units, so part-time and seasonal staff count proportionally, while apprentices and people on parental leave are excluded. Figures come from the last approved annual accounts, and a threshold must be crossed in two consecutive years before the status actually changes. A single exceptional year does not cost you the status, and does not gain it either.

The status has direct financial consequences: eligibility for SME-specific instruments, higher funding rates in some schemes, and access to topics restricted to SMEs. It is verified during validation, not taken on trust, so establishing it honestly at the start is cheaper than defending it later.