The paper entitled The business environment of internal markets and small and medium enterprises, analyzes small and medium-sized companies on the internal market of the European Union. The research goes from defining the research problem, and these are the challenges that small and medium-sized enterprises face in the Internal Market of the European Union. The internal market has been created to ensure conditions for free competition, intellectual property protection and ultimately a more efficient, competitive and innovative economy of the European Union under the same conditions for all members of the market and the free flow of goods, services, labor and capital. The objectives of the research are to determine the performance of small and medium-sized enterprises in the European Union, their ways of financing, the European Union's support for the development of small and medium-sized enterprises, and the link between development and the impact on the internal market. The aim is also to analyze the impact of the business environment of the EU Internal Market on small and medium enterprises and vice versa. The research revealed that small and medium-sized entrepreneurs at EU level, with a share of 99.8% of active companies, have a significant impact on the overall market share. Small and medium-sized enterprises are recognized as important segments that contribute to the growth and prosperity of the EU. But, small and medium-sized entrepreneur is still faced with a number of problems, of which special attention is paid to education, access to finance, fear of failure in sanctions and administrative burdens.