Entrepreneurship is the originator of growth, development, new employment, and social integration. As one of the drivers of economic progress, it requires particular attention and continued support for economic policy. Despite the (once) dominant role of large business, micro, small and medium-sized enterprises today form the backbone of the development of the Croatian economy. That is why their analysis will be the subject of this final paper. The available data indicate that the micro, small and medium-sized enterprises (SMEs) sector today account for slightly more than 99% of the total number of enterprises and employs more than 2/3 employees. Despite before mentioned fact, this sector does not reach its maximum potential in the Republic of Croatia, and the reason for this lies in several administrative obstacles and the lack of financial support essential for realizing and starting a business venture. In this paper it will be presented and analyzed in which way the Republic of Croatia encourages the development of entrepreneurial activity and what challenges Croatian entrepreneurs face. Aiming easier transparency, the work is divided into two parts which have been processed through four thematic units. The first part of the work is linked to the theoretical significance of entrepreneurship, the entrepreneurial process, and the SME sector. The empirical part of the work, with detailed insight into entrepreneurial activity in the Republic of Croatia, as well as the SME sector, is shown in the second part of the paper and analyzed through the last two parts of the work.