Corporations and enterprises are terms commonly used in the business world. They both refer to companies, but have different connotations that can affect how investors, lenders and others think about these companies. In the case of a corporation, the company is actually defined by a legal status according to U.S. regulations. The term enterprise can have more varied meanings.
A corporation is a legal body that a business can create when it grows large enough to trade stock publicly. Not only does this give the business the ability to offer stock on the popular markets and attract far greater numbers of investors to create more capital, but the corporation is treated as a separate entity by the government. This means that any lawsuits or legal actions taken against the business will affect only the corporation, not those who own it. There are downsides to this, however. Any income that the corporation produces is taxed twice, once in the corporation and a second time when it passes into the hands of the owner. Most large companies are corporations because of the related stock benefits, but a number of regulatory, financial and structural rules are required of these businesses.
The term enterprise technically refers to all aspects of a business, especially a business that has multiple departments or branches that focus on different activities. When someone refers to the business enterprise, he usually is referring to the business as a whole unit, including all partners and business operations, no matter how separate or different these might be. When a business considers its ultimate strategy and value offerings, it is considering the direction of the entire enterprise.
Enterprise is not restricted to a particular legal definition the way that corporation is. Enterprise and corporation can be used interchangeably. Enterprise can also apply to many other types of businesses. One common key difference is that a corporation is always traded publicly on the stock market, while an enterprise may be private or have only private stock offerings to certain people. Another key connotative difference is the age and size of the business. Many people use the term enterprise to refer to starting business ventures or new businesses that are trying to enter a market.
The business use of enterprise should not be confused with similar terms such as social enterprise. A social enterprise is rarely an actual organization. It refers to a business strategy in which a company focuses on improving social conditions as well as selling products and services. This helps win the business favor among consumers and allows it to have a positive impact. However, it says little about the structure of the business itself. It is usually corporations that have the funds and influence to practice social enterprise.