You may be a student doing research or deciding on a name for your new business, and you'd like to know if there's a difference between a business and an enterprise.
For the most part, business terminology gets thrown around without significant consequence, but every once in a while, it's important to be clear about what something means. Whether it's a good grade on your business paper or for legal purposes, this article will go over the legal definitions of business and enterprise, and explain the differences.
Disclaimer: This website's information does not represent, and is not intended to represent legal advice; rather, all information, content, and materials on this site are provided for general informational purposes only.
What is the Legal Definition of a Business?
According to dictionary.law.com, the legal definition of a business is “any activity or enterprise entered into for profit.”
Furthermore… “a business does not mean it is a company, a corporation, partnership, or has any such formal organization, but it can range from a street peddler to General Motors.”
The legal definition of an enterprise is similar…
What is the Legal Definition of an Enterprise?
The Lectic Law Library defines an enterprise as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.”
Like a business, an enterprise can also be an individual, corporation, partnership, or any union or group of individuals (which sounds a lot like a formal organization, as dictionary.law.com states in their legal definition of a business).
So, what's the difference?
Business vs. Enterprise. What's the Difference?
While business and enterprise appear to have similar meanings, one difference (according to the definitions above) is that an enterprise does not have to be “a legal entity.”
Although a business doesn't have to be a formal organization, the IRS (irs.gov) states,
“When beginning a business, you must decide what form of business entity to establish.”
Business entities include sole proprietorships, partnerships, corporations, S corporations, and limited liability companies (or an LLC), which are all legal entities.
A further clue can be found at the University of Oxford Faculty of Law. While a majority agree that an enterprise must be run through a legal entity, there are exceptions, such as an insurance enterprise.
According to the University of Oxford, persons who participate as part of an enterprise united by contracts do not necessarily require a legal entity at the core of those contracts.
So, while a business and an enterprise can in some instances be the same as a matter of terminology, an enterprise has a broader meaning with respect to the law.
Of course, the term Business can simply mean “mind your own business” and the Enterprise might be a starship.
Legally, however, the implication is that a business is a legal entity (according to the IRS), while there are instances when an enterprise might not be.
Profit vs. Non Profit
Another distinction between business and enterprise is that the purpose of one is to earn a profit, while that is not always true of the other.
One example is a social enterprise, which operates as a non-profit for the common good.
Another example is a community enterprise, which also puts social objectives at the center of its operation.
The Difference Between an Enterprise and a Company
The legal definition of a company, according to The Lectic Law Library, is “an association of a number of individuals for the purpose of carrying on some legitimate business.”
Again, a legitimate business or company is a legal entity that differentiates itself from an enterprise.
The purpose of a company (like a business) is to earn a profit, whereas that's not necessarily the primary goal of an enterprise (as explained above).
Of course, there are other definitions of company. You might have company for dinner or enjoy the company of your friends, for example, but that's a different story…
Can I Use “Enterprise” in My Business Name
Yes, you can use the word enterprise in your business name. Although an enterprise is often understood to mean a business, it is not a specific business structure.
On the other hand, similar terms such as “corporation” or “incorporated” are legal entities and should only be used when they identify their respective forms of business.