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What Is an Independent Business?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 18 August 2016
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An independent business is one that is not publicly traded on the stock market, and is generally owned by a very small group of individuals. Independent businesses may belong to a sole proprietor, a partnership, or a select group of several owners. While independent businesses often have the advantage of choosing their own destinies and focusing on long-term strategy, they may be somewhat limited in terms of expansion possibilities.

One of the major features that distinguishes an independent business is its status as a privately held company. This means that stock in the company, if it exists at all, cannot be traded on the open market. In an independent business, the only people with access to shares of stock are the owners and select employees. This can be highly advantageous, as the only people the owners have to be concerned with pleasing are themselves. A privately held company often has the opportunity for a more customized, personal business plan that does not need to be accepted by hundreds, or thousands, of faceless shareholders.

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The management structure of an independent business typically places most power in a few key hands. A sole proprietorship allows one person to own the whole company, or at least enough of the company to have decision-making power on all issues. A partnership typically divides power between two or three main owners, who may have an interest in the business equal to their investment in it. Private corporations can involve several interested investors, though the shares still remain within the company structure and cannot be sold on the open market.

One enormous advantage to existing as an independent business is the lack of duty owed to public shareholders. In general, public companies must primarily concern themselves with pleasing shareholders on a present-day basis, giving them immediate returns so that they will stay invested with the company. An independent business, as long as it manages to stay afloat, can direct its attention to a long-term vision for the company. While this may mean that no one gets rich quickly, it can set the stage for a slow-growing, successful company that is able to stay true to core values and the ideals of the owners.

The downside of an independent business is that it does not have access to some of the natural benefits of a public company, or an established franchise. An independent business must build a brand name, create a track record of success, and rely on personal appeals to gain new investments. If the stock market surges in a specific area, an independent business may not benefit, since its stock is not publicly traded. Independent companies may have a longer, slower expansion period based solely on performance.

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