The paper will deal with the basic prerequisites for the introduction of e-business in small and medium-sized enterprises, as well as the reasons why their introduction is necessary in terms of building competitiveness. Conceptually, electronic business and its forms will be defined, and the features of electronic markets will be described. Special emphasis in the paper is on the analysis of security risks in electronic business. The paper will investigate the features of electronic business in small and medium-sized enterprises of the Republic of Croatia, taking into account the computer security component. The review of previous research shows that in the Republic of Croatia the process of informatization of the public sector was delayed and the approach to the development of e-business was fragmented. In Croatian companies, there is also a noticeable lack of knowledge about the impact of e-business on competitive advantage and, consequently, investments in e-business are relatively low. An integral approach to e-business based on the redesign of business processes and the introduction of ERP systems, investments in networking and collaborative value generation using the CPFR system, and strengthening of financial and fiscal support for the implementation of e-business in entrepreneurial entities in the Republic of Croatia is proposed.