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What is an Enterprise Company? [Simple and Quick Definitions]

If your small business or startup will soon officially go into business, then you need to register with your state or federal government.

One means of registering your company that you might be interested in is as an enterprise company.

If you’re not 100% clear on what an enterprise company is, then this short, to-the-point guide is for you.

We’ll succinctly explain what an enterprise is, go over the types of enterprises, and discuss if you can register your company with the word ‘enterprise’ in the name.

Let’s begin!

 

What Is an Enterprise Company?

An enterprise company is a for-profit business. While any business can be considered an enterprise, the term is often associated with startups and entrepreneurial projects.

meeting office life GIF by South Park
Source: Giphy

An enterprise is not necessarily the same as a company. For instance, the aforementioned definition of an enterprise proves the association with startups. You’ll also hear the word enterprise used in certain industries more often than others, specifically in IT.

A company is a company, no matter what type it is. Its primary goal is to drive profitability through its enterprise product and services. 

An enterprise, while it does want to generate profits too, does not necessarily make that the entire goal to the same extent that a company does.

The founder of an enterprise versus a company also differs. Entrepreneurs naturally gravitate towards enterprises for reasons that extend beyond profit.

Perhaps they want to introduce competitive pricing that’s lower than what everyone else is charging.

A business enterprise might strive to fill in a gap, producing something that doesn’t yet exist but needs to. They might also be more concerned with solving a specific problem.

Commonly, an enterprise has a large team, a complicated organizational structure and interconnected processes. Compared to startups, enterprises more often automate their workflows or undergo complete digital transformation to organize the work with maximum efficiency and output.

 

What Are the Types of Enterprises?

Enterprises can be classified based on size, ownership, sector, and legal structure. Let’s go over them now.

Based on size

Enterprises can be categorized according to their size and the number of people they hire. Here’s a list of enterprises ordered from smallest to largest.

Microenterprise

Micro enterprises are small businesses that usually hire less than ten people and require little capital to start. They typically operate locally and are managed by the owner, offering personalized services or niche products.

Examples include businesses like street vendors, plumbers, bakers, etc. 

Small enterprise

Small enterprises have between 10 and 50 members and focus on regional markets. These are the most common type of businesses. They have more resources and structure than micro-enterprises, allowing for moderate expansion and increased market presence.

Examples include local businesses like a small restaurant chain or a local IT service provider. 

Medium enterprise

Medium Enterprises have between 50 and 250 members. They have made a noticeable impact in the market and need a good amount of capital to keep things going. These businesses often look to grow beyond their local area, and aim to expand nationwide to boost their brand and customer reach.

It’s also worth noting that micro, small, and medium enterprises are often referred to together as SMEs. Examples include a growing tech startup. 

Large enterprise

Large enterprises are companies with over 250 employees, and they don’t just stick to one place—they’re often spread out across multiple markets or even countries. Any such large organization has a lot of resources at its disposal, which allows it to have complex management structures and a significant influence on its industries.

Google and Apple are well-known large enterprises. 

Based on ownership

The next kind of enterprise classification is based on who owns the enterprise. Let’s see why they are. 

Public limited company

A public limited company or PLC is sellable to the general public once the enterprise attains certain financial benchmarks. Legal and regulatory criteria must be met as well.

For instance, the enterprise must be upfront about who it’s traded with and for how long, how many accounts it has open, where those accounts are located, and other elements of its financial standing.

Selling public shares is more than a means of earning more profit for a PLC. Through these increased earnings, a PLC can also expand thanks to its boost in funds. Burberry Group plc is a well-known PLC that has leveraged public investment to expand its brand and market presence globally.

Read also: 12 Entrepreneur Personality Traits We Should All Aim For

Private limited company

A private limited company, abbreviated as an Ltd., is considered a free enterprise. Even still, this commercial enterprise has its own identity and has gone through all the steps to become a legally incorporated business.

Within a private limited company are shareholders. Each shareholder takes on a chunk of the debt liability for the enterprise as a whole. These shareholders are also granted freedoms such as the ability to choose directors who will make decisions about the enterprise’s business direction, which operations are carried out, and how they’re carried out.

That said, a private enterprise still has a manager or boss just like any other company, and they deal with the daily operational responsibilities.

If you’re setting up a business under the Private Limited Company structure, it’s crucial to establish a robust legal foundation. An essential step in this process is to set up an operating agreement for your LLC, laying out the company’s operational and financial decisions among its members.

Not only does this protect your assets, but it also clarifies the management roles within the company, ensuring a smoother operation and resolution of potential conflicts. Ben & Jerry’s Homemade Holdings Inc. is a notable private limited company.

Excited Parks And Recreation GIF by PeacockTV
Source: Giphy

Joint ventures

Joint ventures are partnerships where two or more companies combine resources to achieve a common goal. They share ownership, profits, risks, and decision-making. This shared model allows partners to leverage each other’s strengths, enter new markets, or tackle large projects. 

Joint ventures can be temporary or long-term, depending on the objectives. Hulu is an excellent example of a joint venture as it is a joint streaming service venture between Disney, Comcast, and (formerly) 21st Century Fox.

Multinational Corporations (MNCs)

MNCs are large companies that operate in multiple countries, maintaining assets and facilities abroad. They have a main headquarters for major decisions but also have local offices in different regions to handle specific needs.

Organizations like these utilize various methods, such as centralized decision-making, local adaptation, and customer relationship management, to operate efficiently globally.

These larger companies benefit from economies of scale, access to diverse markets, and the ability to optimize operations globally. For example, Unilever operates in over 190 countries, allowing it to cater to a wide range of customers and efficiently manage its global supply chain.

Based on sector

Based on the sector, which refers to the part of the economy a business operates in, enterprises can be classified into several categories, each focusing on different types of activities. 

Primary sector enterprises

Primary Sector Enterprises focus on extracting and harvesting raw materials from the earth or nature. They form the base of the economy as they provide resources for other sectors.

Examples include agriculture industries like Farms, fisheries and forestry, mining companies, as well as oil and gas extraction firms.

Secondary sector enterprises

These businesses transform raw materials from the primary sector into finished or semi-finished products. This sector includes manufacturing and construction.

Examples include automobile manufacturers, food processing companies, and construction firms.

Tertiary sector enterprises

Also known as the service sector, these businesses provide services to consumers and other businesses. This is the largest sector in most developed economies and contributes significantly to their employment and GDP.

Examples include retail stores, healthcare providers, and transportation and logistics companies.

Quaternary sector enterprises

Quaternary sector enterprises focus on knowledge-based services, which include activities related to research, development, and information technology. Although it is sometimes considered a part of the tertiary sector, the quaternary sector is often distinguished due to its emphasis on intellectual pursuits and knowledge generation.

Examples include IT consultancy firms, higher education institutions, and research and development labs.

Based on the legal structure

Based on the legal structure, which is how a business is officially set up and run, enterprises can be divided into several categories. Let us discuss what they are. 

Partnership

The next type of enterprise is a partnership. Several people will come together and collectively become owners of the enterprise. Each owner can make decisions about the future of the enterprise and the business process. They will also divvy up profits among themselves. 

However, not all the earnings or responsibilities in an enterprise partnership may be equal. Some partners may be deemed senior partners, who would out-earn and out-perform junior partners.

Other types of hierarchies among the partners can be assigned, but this is up to each individual partnership.

The partners might have their own specialties that altogether make the enterprise a more efficient operation or they might all specialize in the same area.

Read also: These 20 Team-Building Questions Are Pure Gold

Sole proprietorship

Sole proprietorships can include trade businesses, online businesses, and even small businesses. Their enterprise culture is usually highly personalized and reflects the owner’s values and vision.

Individuals can be sole proprietors as well. For example, if you sold a product on a site like Etsy or Amazon, you’d be a small enterprise but an enterprise, nevertheless.

Read also: Copyright vs Trademark: Common Misconceptions Clarified

Corporations

A corporations is legal entity separate from their owners (shareholders). This separation allows corporations to enter contracts, own assets, and pay taxes independently.

They offer strong protection of personal assets, meaning shareholders are typically only liable for the amount they have invested in the company. However, corporations face more regulations and complex tax rules, including potential double taxation, where both the corporation’s profits and shareholders’ dividends are taxed.

Examples include Apple Inc., ExxonMobil Corporation, and Walmart Inc.

Limited Liability Companies (LLCs)

LLCs combine elements of corporations and partnerships. They provide liability protection for owners (members) while offering tax flexibility and simpler management structures. LLCs are popular among small to medium-sized businesses.

Examples include Amazon.com LLC (before it became Amazon.com Inc.) and Chrysler LLC (before merging with Fiat).

Social enterprises

And lastly, a social enterprise is a unique type of enterprise that aims to make a positive impact on society or the environment. It reinvests profits into social or environmental goals rather than maximizing profit for owners or shareholders.

Social enterprises focus on community health, education, or sustainability. Warby Parker is an excellent example, as it donates a pair of glasses for every pair sold.

Can Your Company Name Include the Word ‘Enterprise’?

The word “enterprise” instantly elevates any company or brand name. As such, you might be very interested in using the term in your company name.

Well, you should only do this if yours is indeed an enterprise brand. To just call your company an enterprise but not truly be an enterprise is confusing right out of the gate.

It also comes across as deceitful to your customers and any other business partners you may have.

Read also: 10 Simple Strategies to Keep Customers Happy

Conclusion

Enterprise companies can include partnerships, sole proprietorships, private limited companies, and public limited companies.

Now that you better understand enterprise companies, you can make sound business decisions for the future of your startup!

Content updated for freshness and SEO by Swastik Sahu.

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