What is an enterprise?

“Enterprise” is a term we hear a lot in the business world, but what exactly makes a company an enterprise?

What is an enterprise company?

The definition of an enterprise is not cut-and-dried. Many explanations are actually quite broad and, in some cases, even vague. For example, Tim Uittenbroek, founder of VPNMash, says that an enterprise describes the action of someone who has taken the initiative to run a business. He defines it as “a legal entity possessing the right to do business on its own.”

Alan Pelz-Sharpe, founder of Deep Analysis, confirms that there are lots of definitions of “enterprise,” many of which conflict with one another. Based on his expertise, he loosely defines an enterprise as a “for-profit company with huge revenue.” He says enterprises are neither medium-sized businesses nor small businesses, but rather very large ones.

Of course, that raises questions about what’s considered “huge” revenue and what exactly makes a company large in the first place. This is where things get a little murky.

Characteristics of an enterprise

While there isn’t a universal definition for what makes a company an enterprise, enterprises generally have the following traits:

• Large workforce

The size of the workforce refers to the number of employees the company has. According to Maksym Babych, CEO of SpdLoad, “In the U.S. there are no clear rules on what to define as an enterprise. However, the E.U. defines enterprise level as more than 250 employees.”

• Large amount of revenue

Enterprises generally have an annual revenue ranging from $10 million at the low end to $1 billion or more. However, there is no set revenue criteria or cutoff number.

• Focus on scale

Charles Edge, director at JAMF Software, says there is also more emphasis on scaling operations well when a company is at the enterprise level. “This means that more diligence is often taken to plan and prepare,” he says, “so you want to be much more deliberate than you might be in a small business.”

• Wide range of goods and services

Enterprises usually will find ways to extend their reach into different markets. For example, Google has extended its product range beyond just a search engine to also include phones, an internet browser, ad services, file storage, and more.

What isn’t an enterprise?

Another way of defining an enterprise is to identify what an enterprise isn’t.

For example, some very large organizations meet employee and/or revenue criteria comfortably, but they’re not considered enterprises because they’re nonprofit organizations, explains Pelz-Sharpe. “Harvard University is essentially a large enterprise, but because it is technically not-for-profit, it doesn’t get listed.”

The same goes for large governmental organizations that may generate billions of dollars in revenue and have thousands of employees. They aren’t enterprises because they’re nonprofit organizations.

In the same vein, Pelz-Sharpe says you could have a small hedge fund that manages billions of dollars but has only a handful of employees. Because the company doesn’t come close to the typical 250 employee minimum, the company isn’t considered an enterprise no matter how large its revenue.

What are the different types of enterprise companies?

• A public limited company (or publicly traded company)

A public limited company, as it’s known in the UK, refers to an enterprise that sells company shares to the public. This provides shareholders some ownership of the company, giving them a say in company decisions.

“Going public” has its pros and cons, but many companies choose to go public for the opportunity to raise capital.

The equivalent of a public limited company in the United States is a publicly traded company.

• Private limited company

Put simply, a private limited company is an enterprise company under private ownership. While a private limited company is still owned by shareholders, those shares are not  available for purchase on public stock exchanges. Instead, a shareholder has to be invited to invest in the company — for example, through a venture capital firm.

Executives of a retail company might want to keep the company private to maintain control of decision making. An executive would have to approve of new shareholders if they’re outside of the company.

• Partnership

A partnership is a joint business of two or more parties who split the profits and share losses, allowing companies to combine their resources.

There are three main types of partnerships: general partnerships, limited liability partnerships, and limited partnerships.

General partners provide capital and have a say in operations and decisions, while limited partners generally just provide capital.

Meanwhile, limited liability partners have a degree of responsibility for business management as well as some liability. However, a partner is not responsible for the actions of another (e.g. if one partner is being sued for malpractice).

• Sole proprietorship

A sole proprietorship is a business owned and run by just one person. Only the owner pays income tax on the company’s profits. Several large companies like Sears and J.C. Penney actually started off this way.

Since a sole proprietorship only has one owner, filing taxes and other processes are much simpler. For example, these companies generally don’t need to register with their state, and they can get more tax benefits. Tax filing is also easier because the owner can simply use their personal Social Security number.

However, this also means owners open themselves up to being personally liable for the business’s debts.

Examples of enterprises

With a better understanding of what an enterprise is and isn’t, let’s discuss some enterprise examples.

Pelz-Sharpe says all Fortune 500 companies are considered enterprises. That includes companies such as Ford, Microsoft, GE, and Oracle. Edge’s list includes Walmart, Exxon, Apple, Amazon, UnitedHealth Group, McKesson, CVS, and AT&T. These are all large companies that meet or exceed the loosely defined enterprise criteria.

While there isn’t a single definition of “enterprise,” you can safely assume that an enterprise is a very large, for-profit company with more than 250 employees that generates a ton of revenue and has the right to conduct business on its own.

As for examples of each type of enterprise, there are plenty. Several tech giants like Apple and Google are examples of publicly traded companies in the United States, while IKEA is a well-known retailer that is under private ownership. An enterprise partnership, meanwhile, can include organizations like law firms, accounting firms, and medical clinics. 

For more information, check out our detailed guide on enterprises.