I have to write an application for a friend to use in his business - so it won't be on the App store. How do I go about deploying it and distributing this app?
Would he require a enterprize licence? And where/how would he download it to his device for testing purposes?
An enterprise license you need something like 9000 employees.
The only other way to do it would be to add all their devices to your provisioning portal and supply them with ad-hoc releases which they can drag and drop into itunes to add to their devices.
I've already asked this question, some interesting answers - see here:
EDIT: I realise there is more to your question than what is answered in mine.
Yes, the client will need to get an enterprise license (Apple recently removed the 500 employee limit). Once he has the license, he will need to add you as a developer under his license. This will allow you to develop and digitially sign the app on your machine.
As for testing, when you enroll in an iOS development program, you can then generate + download the appropriate certificiates to sign an app for hardware testing. You'll need to install what's called a "Provising Profile" onto the testing device, then when you're in xcode, change the deployment type from "iPhoneSimulator" to "Device" - this will then compile + deploy the app in it's current state to the device. You can also install this Provising Profile onto other devices then send them the compiled app (which is installed via iTunes).
There is more to be found out about this by going to the Apple Developer Portal but I thought I'd give a brief overview of what you were asking.
If your friend's business requires deploying to less than 50 to 100 total devices (the 50 includes 100% replacements/upgrades, the 100 includes zero), then they can apply for a regular iOS Developer Company enrollment (not Enterprise), and use Ad Hoc deployment, which does not require an store (just email/website plus iTunes).
Enterprise requires a D&B rating, usually something that only larger companies have.