What Is Enterprise In Business

What is enterprise in business? This vocabulary is common among business people.  

Even with how common it is, some people need to learn the meaning of the word.

If you are in this group, do not fret.

Here is an opportunity to learn and understand what enterprise is in business, so you can also add it to your business vocabulary.

So, ensure that you read on to the end.

What is Enterprise? – What Is Enterprise in Business

Any organisation or venture run by an entrepreneur or group of entrepreneurs to make a profit is an enterprise

Individuals who are entrepreneurs are enterprising because they take risks.

Any business that doesn’t aim to generate profit is not an enterprise.

Types of Enterprise – What Is Enterprise in Business

Different types of enterprises exist.

However, they are different because of their legal structures and ownership.

Sole Proprietorship

Sole proprietorships are small companies owned by one person.

The owner of a sole trader business is called a sole proprietor.

They start, own, and operate the business alone or with the help of family members, friends, and some staff.

You can find sole proprietorship enterprises around you.

They include trade businesses such as decorators, handypersons, hair stylists, painters, etc.

An entrepreneur is legally bonded with the business.

In other words, when the business faces a lawsuit, the entrepreneur’s assets will be at risk.

Features of Sole proprietorship – What is Enterprise in Business

To better understand sole proprietorship, here are some of its features:

No Legal Formalities

Sole proprietorship enterprises have no separate law governing them.

In other words, there are few special regulations and laws to follow.

Additionally, they don’t require to be incorporated.

As an entrepreneur starting this enterprise, you need a licence to operate.

This sort of enterprise promotes ease of operation.

Profit and Risk – What Is Enterprise in Business

As an owner of a sole proprietorship enterprise, you are the sole bearer of every risk that’s with the business.

You enjoy the profit and bear the risks.

This means that if the business suffers any loss or fails, the owner will also suffer the loss.


As there isn’t a legal separation between you and the company, there is no separation of assets and liabilities.

When your business doesn’t meet its liabilities or debts, you are liable for them.

In other words, you will have to pay for them.

For example, when your business owns debts and cannot pay, you might have to use or sell personal assets to pay up.

No Separate Identity – What Is Enterprise in Business

Legally, you and your business are the same.

There is no legal separation of identity.

Therefore, you are responsible for every transaction and activity of the enterprise.


As a result of no separation between you and your business, it entirely depends on you.

Your retirement, bankruptcy, imprisonment, insanity, or death will affect your sole proprietorship.

If any of the above occurs, your enterprise can close down with it.

Partnership – What Is Enterprise in Business

A partnership enterprise is started, operated, and managed by two or more people.

These people establish an agreement that stipulates the terms of the partnership, such as responsibilities, the share of losses and profits, etc.

There are different types of partnerships, such as general partnership, limited partnership, limited liability partnership, and LLC partnership.

Features of Partnership – What Is Enterprise in Business

Regardless of the different types, every partnership has the following features:


For an enterprise to be a partnership, it has to have an agreement between the individuals in the business.

They have to be competent to sign a contract.

For example, lunatics, minors, and insolvents are not competent because they are not qualified.

The agreement can be written, oral, or implied.

Partnership agreements that are in written form are referred to as partnership deeds.

Regardless of the form of an agreement, it has to be clear on the status of each of the partners.

This includes the details of every partner’s work, their loss and profit sharing ratio, and so on.

Legal Business – What Is Enterprise in Business

 There has to be a legal business before a partnership can be made.

The Partnership Act doesn’t accept any formal partnership that isn’t legal and carries out charitable operations and activities.

A partnership must have the intention of generating income and earning profits.

Agency Relationship

Every individual in a partnership acts as an agent for the enterprise.

There is what is referred to as an agency relationship between partners.

An enterprise can be run together by the partners or by a nominated partner for all other partners.

So, every action the nominated partners takes is binding on the enterprise and its partners.

Profit-sharing – What Is Enterprise in Business

A partnership agreement has to specify the method of sharing losses and profits among the partners.

Charitable ventures that different people of like minds jointly run aren’t a partnership, as sharing of losses and profits will be missing.

Nonetheless, sharing profits between yourself and others doesn’t connote or prove a partnership.

Unless you agree with others on sharing losses and profits, you are not in a partnership.

No Separate Identity

The enterprise doesn’t have an identity or personality.

It is dependent on its partners.

So, it can end in a situation of bankruptcy, lunacy, or the death of one partner.

Unlimited Liability – What Is Enterprise in Business

The partners are severally and jointly responsible for every operation and activity of the partnership.

This means that when the enterprise’s funds and assets are insufficient to meet its debts, it will add partners ‘ private assets.

Creditors can reach out to any financially sound partner and collect their claims.

No Transfer of Shares/Interest

Partners can only transfer interest and shares owned by a partner to an outsider if all the partners agree.

A member is not eligible to unilaterally transfer their interest to outsiders.

Private Limited Companies (Ltd.)

Private limited companies are enterprises established by a few individuals or groups of individuals.

They are legally incorporated with a legal identity.

As a result, the owners are not liable for the business’s legal or financial obligations.

The owners don’t directly run and operate the business.

Instead, they appoint directors that will do this in their place.

Also, the shares of private limited companies are not publicly traded.

Features of Private Limited Companies (Ltd.)

The following are the feature of public limited companies that will help you understand them better.

Member/ Numbers of Directors –What Is Enterprise in Business

Private limited companies can have two members as the minimum and 200 as the maximum.

So, a private limited company can have several owners (shareholders) ranging from 2 to 200.

These members don’t run the enterprise; they appoint directors.

The Act allows private limited companies to appoint 2 members as the minimum and 15 as the maximum.

Limited Liability

Private limited companies provide their members with limited liability.

This means that the shareholders are not liable to pay back their company’s losses and debts by selling off personal assets.

They are only liable to pay the guaranteed amount agreed upon by all members.

Name – What Is Enterprise in Business

Every private limited company is required to include “private limited” right after the name of their company.

For instance, let’s say your company’s name is Jenny; then it has to be written in all your communications and registration form as “Jenny Pvt.Ltd”

Perpetual Succession

Private limited companies are legally separated from their members; it has their own identity.

As a result, it doesn’t stop existing legally when a member dies, goes bankrupt, or is mentally unstable.

In other words, it has perpetual succession; it keeps existing.

Prospectus – What Is Enterprise in Business

Prospectuses are detailed statements that provide the standards or status of companies’ affairs.

These statements are issued to the public to get them to purchase a company’s share.

However, PLC doesn’t issue prospectus because they don’t trade their shares publicly.

Public Limited Companies (PLC)

Public limited companies also referred to as PLCs, are enterprises owned by shareholders and run by directors.

They are often confused with private limited companies (Ltd.).

As similar as these two business enterprises are, they are different.

Unlike private limited companies, public limited companies can trade their shares to external parties (the public).

Features of Public Limited Companies – What Is Enterprise in Business

The following are the features of public limited companies.

Knowing the features of PLC will help you understand the difference between public limited companies and private limited companies.


The Companies Act of 2013 allows 3 directors as the minimum number of directors for a PLC.

However, there isn’t any limit on the highest number of directors a PLC can appoint.

So, a PLC can have as many directors as possible.

This is one feature that differentiates public limited companies from private limited companies.

Limited Liability – What Is Enterprise in Business

The shareholders of public limited companies have limited liability.

That is to say; they are not personally liable for their companies’ losses and debts.

It differs from a partnership, where the owners are severally and jointly liable for their business debts.

However, this feature of PLC doesn’t offer its shareholders immunity.

This means that shareholders are accountable for any illegal actions they take.


The Companies Act 2013 requires that every public limited company have the PLC title “limited” written immediately after their name.

So, for example, if your business name is Jenny, it will be Jenny. Limited

Prospectus – What Is Enterprise in Business

Prospectuses are statements companies give to the public by companies inviting them to buy their shares.

The public limited companies Act requires every PLC to issue prospectuses.

This is another feature that differentiates public limited companies from private limited companies.

 Since private limited companies can’t trade their shares, they cannot issue prospectuses.

Understanding Entrepreneurs – What Is Enterprise in Business

The word “enterprise” comes from the French word “entreprendre”, which means to “undertake”.

Entrepreneurs undertake business intending to gain profits

They do this regardless of the risk they have to bear.

These people put in their money, effort, time, and other resources to grow an enterprise to wherever they want it to get.

Most entrepreneurs undertake these businesses with the various risk associated with making a profit but also for one or more of the following reasons:


Entrepreneurs can decide to start an enterprise not only because they want to gain profit but also to solve a problem.

They see problems and try to solve them.

So, they charge head-on into it and intend to gain profit as they are doing so.

Exploit Ideas – What Is Enterprise in Business

Another reason entrepreneurs start an enterprise is to exploit their ideas.

They generate new ideas or create products that they believe will succeed.

So, they form a business to gain profit from their idea.

Filling Gaps

There are gaps in the market that needs to be filled.

Entrepreneurs can see a gap and believe that they can fill it.

So, they start an enterprise that will fill the gap.

Knowledge-based – What Is Enterprise in Business

Sometimes what customers need is knowledge.

An entrepreneur who believes that they can provide specialist knowledge to customers who will pay for it can decide to start a business.

Competitive Pricing

Entrepreneurs can decide to start an enterprise because they can provide a service or create a product that will be cheaper for the customers.

Some entrepreneurs start an enterprise because they want to provide competitive prices.

Where Entrepreneurs Get Their Ideas for Their Enterprises – What Is Enterprise in Business

Entrepreneurs can decide to establish their enterprises for different reasons.

Most of them get the idea for establishing their enterprises from the following sources:

  • Personal Experience or others
  • Attending events and reading
  • Everyday coincidence
  • Skill or hobby
  • Brainstorming
  • Absorbing others ideas
  • Prior work experience
  • Monitoring the trend

Qualities That Help Entrepreneurs Establish Enterprises – What Is Enterprise in Business

Entrepreneurs are the people who start enterprises.

In other words, without an entrepreneur, there will be no enterprise.

So, who are entrepreneurs?

What qualities help entrepreneurs successfully establish an enterprise?

Creative Thinking – What Is Enterprise in Business

To establish an enterprise, you need ideas.

What will help you in generating or recreating an idea is creative thinking.

Without creative thinking, entrepreneurs will keep using the template people have used without making something new.


Entrepreneurs starting an enterprise and working towards its success need to be confident.

They need to be confident in their ideas, processes, and themselves.

Having confidence in themselves will help them believe they can achieve their goal.

If you don’t believe in what you offer, you shouldn’t expect others to.

Motivation/ Self-Discipline – What Is Enterprise in Business

Starting an enterprise is a challenging venture.

It requires motivation and self-discipline.

As an entrepreneur, if you cannot motivate yourself to take the different steps to establish your business, you might not.

Self-discipline will make you understand what you need to do and what you should disregard while working to establish your business.

These two qualities work hand-in-hand to ensure that you don’t stop midway.


To be goal-reaching means to be conscious of your goal and focused on achieving it.

You can set goals but not achieve them when you aren’t high reaching.

However, when you are, your focus will be on achieving your goal.

To achieve your goal, you need to make a plan, outline your objectives and follow through with it.

Persistence– What Is Enterprise in Business

Persistence is important in starting and running a business.

This is because there will be ups and downs.

To keep pushing on during challenges will make your enterprise stronger and you.

Risk Taking and Management – What Is Enterprise in Business

Risks are part of businesses.

So, any entrepreneur that wants to start an enterprise and succeed has to be capable of taking risks.

Also, you need to know how to manage those risks.

Being able to do this will ensure that your business doesn’t fold up after you experience a risk.

Conclusion on What Is Enterprise in Business

An enterprise is a business that operates for profit.

Entrepreneurs start, own, and run enterprises.

Apart from gaining profit, some other factors can inspire entrepreneurs to start enterprises.

These people get their ideas from starting enterprises from different sources, such as their personal experiences, the event they attend, their skills or hobby, or monitoring trends.

Some of them absorb the ideas of others, brainstorm, read, or use their prior work experience to generate ideas for their enterprises.

There are four types of enterprises: sole proprietorship, partnership, private limited companies, and public limited companies.

When you want to start an enterprise, you ought to know the one that will work best for you.

If you have carefully read through this discussion, you will understand the different types better and know the one that will work best for you.