What Does Enterprise Mean in Business?
Have you ever asked yourself the question: ‘What does enterprise mean in business?’ This is a question that many people think they understand, but when questioned, discover they’re not sure about. To this end, you must consider what enterprise means in business to determine which solution would best suit your business needs.
So, don’t leave things to chance; read on to learn more about what enterprise means in business, and turn, what this means for your business opportunities.
What Does Enterprise Mean in Business?
Enterprise is a term that most of us assume to be a synonym for business, but this is not wholly the case. There are three recognised and accepted definitions of enterprise in a business. We’ve summarised these three different varieties of enterprises as follows:
- The first definition of an enterprise isn’t far from the common assumption. However, the word “enterprise” does not refer to just any business; instead, it applies solely to for-profit businesses and companies.
- The second definition of an enterprise (or enterprising), more commonly used in the business field, is entrepreneurs. Entrepreneurs who have been successful in their endeavours are commonly described as being an enterprising individuals.
- Thirdly, the word “enterprise” can be used to describe a business model or structure. Legal enterprises vary from country to country, but they serve the same common purpose: to outline the operating structure of the business.
Though not a specific definition, per se, enterprise law is also an important point to consider. This field of law concerns the ownership and regulation of UK-based or external organisations providing products or services to the UK market.
As can be seen from the above selection of uses for the word “enterprise”, it is pretty clear that the applications of the term from a business perspective are primarily concerning the success and profitability of a firm.
Forms of Legal Enterprises
There are many different forms of legal enterprises, but a handful of the most common in the UK are listed as follows. Each enterprise structure offers unique benefits and drawbacks. From the business’s perspective, it’s crucial to find an appropriate balance between these while establishing the enterprise.
1. Sole Trader
Sole traders (often referred to as sole proprietors in the US) start a company alone. They are responsible for all aspects of the business’s success, including keeping track of its financial records and the like. There can be many potential benefits to this business enterprise model, including the low startup funds required, the lack of conflict (due to there only being one owner) and the like.
However, the primary drawback of operating as a sole trader is that there is no legal distinction between the business owner and their firm, meaning that the owner is liable for all debts and taxes. If the business gets into debt, the owner will pay those debts out of their savings.
2. Partnership
Another joint legal enterprise in the UK is a partnership model. Partnerships are very similar to sole traders in that they are simple to set up, relatively low cost, and the like. They can also offer some benefits over sole traders. A more significant initial pool of startup capital is usually available, and each business owner likely needs to commit less time to the business. Usually, profits and business shares are split proportionately to each partner’s contributions, as laid out in the partnership deed.
However, the main drawback of partnerships is that they still have unlimited liability, so they could be liable for the business’s debts. Moreover, partnerships can fall if there are regular disagreements between the partners.
3. Limited Companies
Limited companies are commonly the business structure used for larger firms. These have the unique benefit that they are considered distinct legal entities from their owners; as such, the owners of limited liability companies will not be liable to pay the business’s debts.
Limited liability companies come with more paperwork than partnerships or sole traders, and accounts need to be announced. They are registered with Companies House, which grants them a separate legal identity from the company’s owners.
There are two models of limited liability companies: private limited companies (usually smaller-scale businesses) and public limited companies. As a notable benefit of the latter, public liability companies can sell shares on the stock market if they wish to raise money for the firm rapidly.
Other Legal Enterprise Structures to Mention
Sole traders, partnerships, and limited liability companies are among the most common business models found in the UK. However, there are also other structures available for enterprises, such as social enterprises and franchises. Meanwhile, we can potentially refer to the trading arm as an enterprise in its own right. However, charities themselves are not-for-profit and, as such, are not considered an enterprise.
There are many business terms and phrases that can seem a little challenging to wrap your head around at times, and often a phrase we thought we understood, we might not have the complete picture of. Hopefully, today’s article will have given you further insight into what enterprise means in business and how you can apply this term to your activities. In addition to what we have covered today, you can read more here.
Other useful links from our knowledge centre:
How To Choose A Business Name
How To Buy A House Through Your Business
11 Skills That Make a Fantastic Business Administrator
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