Organization Vs. Enterprise - Small Business

We handpick every product we feature. We may be compensated or earn commission from the links on this page.Small Business|Business Models & Organizational Structure|OrganizationsOrganization Vs. EnterpriseBy Naveen K. Reddy, Contributor

People use the terms "organization," "enterprise" and "corporation" interchangeably while speaking about businesses. However, each term has a definite meaning in its context. The legal standing and requirements of businesses categorized under one of these terms vary from none to substantial.

An Organization Is Goal-Oriented

An organization is a group of people who work together for a common purpose of managing economic, social or political activities. A family living together can be an example of an organization. A group of friends gathered together to plan and execute a community event can also be an example of an organization. Most organizations lack a for-profit goal.

Numerous legal types of organizations exist. They include military forces, charities, educational institutions, political groups and nongovernmental entities.

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Enterprise Is the Broadest of the Terms

An enterprise is a business venture established to carry out business activities such as manufacturing a product or providing a service. A new project or a company established by an entrepreneur to address the needs of people and generate revenue is an example of an enterprise. Enterprise is a broader designation than a corporation. An enterprise becomes a corporation only if it is legally incorporated in a state.

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Corporations Follow Strict State Laws

According to the Internal Revenue Service (IRS), "a corporation is formed under state law by the filing of articles of incorporation with the state." A corporation is a legal entity that forms a company or a conglomerate to run a business. For taxation purposes, the IRS classifies corporations into two types: C corporations and S corporations. A C corporation is a separate legal entity that is taxed separately from its business owners. An S corporation does not pay taxes itself; its income, losses and deductions pass through to the shareholders, who report them on their personal tax returns.

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The major difference between an enterprise and a corporation is that the latter operates per the laws of the state, while the former does not have the same strict legal implications. Enterprises also don't enjoy the legal protections that corporations usually have when business problems arise.

Difference Between Organization and Enterprise

Both enterprises and organizations can be formal or informal. You can distinguish formal enterprises from informal enterprises by checking if they are registered and regulated. Informal enterprises are unregistered and unregulated. Similarly, you can distinguish formal organizations from informal organizations through their norms, policies and reporting structures.

For example, an informal organization does not have specific norms in place. The major difference between organization and enterprise is that the latter is profit-oriented while the former is goal-oriented. The organization aims to achieve the shared objectives of the group or community, while the enterprise aims to generate revenues by addressing the unmet needs of customers.

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Organizing the Enterprise

The success of an enterprise depends on how efficiently the work environment is organized. An enterprise often comprises several organizations, also called teams, working together to achieve a common objective. Organizing the enterprise is the process of establishing relationships, delegating responsibilities, and defining authorities to manage the groups to work efficiently at the workplace.

Process of Organizing in Management

Organizing is the second most important function of management that flows immediately after planning. According to the University of Minnesota, organizing is "the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives."

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The process of organizing comprises five steps. They are:

• Identify the work
• Group the work
• Establish the hierarchy
• Delegate the authority
• Coordinate

A properly organized process results in a workplace where team members have a clear understanding of their responsibilities. Organizing helps businesses reduce redundancies, avoid miscommunication and eliminate waste. Improper organization results in frustration, confusion and loss of efficiency among the workforce.

References

• Internal Revenue Service: Definition of Corporation
• The University of Minnesota: Planning, Organizing, Leading, and Controlling

Naveen K. ReddyContributor

Naveen is a copywriter and content strategist. He is also an educational consultant who coaches students to equip with relevant knowledge on entrepreneurship and helps them to set up small-scale and freelance businesses.