Purpose of the article is to answer the question whether constant modifications of laws are important from the point of view of benefit for development of undertaking and benefit for the state budget. The article aims at analysis of effect of legislative environment, possibilities of development and maintenance of small and medium businesses. It provides overview of development in numbers of active small and medium businesses in the Czech Republic in 1998 - 2008. It outlines number of economically active small and medium businesses. It compares development in income structure in accordance with the last official data. It testifies to stability of our legislation expressed as number of amendments to selected acts after 1989. On the basis of the given analyses the main problem fields are specified that determine conditions for development of small and medium businesses. On the basis of the above-mentioned analyses the article tries to propose methods of business environment improvement in the Czech Republic.