The importance of entrepreneurship in small businesses
A NFTE-UK case study

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Page 4: Types of ownership

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One of the first decisions to be made in starting a business is how the business will be owned.

The main choices are between setting up:

  • on your own (as a sole trader)
  • with a small number of partners (partnership)
  • as a private company, with shareholders (limited company).

The advantage of sole ownership is that you make all the decisions and take all the profits. However, the sole trader has a lot of responsibility and will need to work extremely hard. Forming a partnership makes it possible to share the workload, but profits have to be shared and there may be disagreements between partners. Forming a private company makes it possible to raise extra capital for the business by selling shares, but setting up a company requires time and paperwork. Also, shareholders take a share of the profits. When Michael Marks started trading he was a sole trader. Later he took on a partner, Tom Spencer. When the business expanded nationally, it became a public company, with its shares traded on the Stock Exchange.

NFTE-UK | The importance of entrepreneurship in small businesses