Small and medium-sized enterprises are key to developing each country's economy. Considering that they account for over 99% of all companies in the Republic of Croatia, it is important to pay more attention to them. It is also important to see the obstacles they face in their business. The aim of this paper is to identify and analyze the key obstacles that SMEs face. Furthermore, it is necessary to see what the role of the state is in addressing these obstacles. The business environment in which small and medium-sized enterprises operate is also very important and whether it is stimulating or disincentive to entrepreneurship in the Republic of Croatia. Also, this paper deals with the ease of doing business data and compares it with the surrounding countries. In line with the information and objectives outlined above, secondary sources of information such as books, scientific articles, interviews, previous research, action plans and national strategies have been used. A survey was also conducted on 40 SMEs with the aim of obtaining primary data on the obstacles they face. The results of the research showed that the key obstacles to the development of entrepreneurship are too much administrative and tax burden and the lack of willingness on the part of the state to make the business environment more favorable to entrepreneurs.