The Types of Shareholders in a Business

A shareholder is someone or a corporation who holds a part ownership in a company by purchasing shares on the stock exchange. The shareholders receive rewards when the company succeeds in enhancing its stock valuation and financial earnings through dividends. Shareholders are not required to be personally responsible for the obligations or debts of the company, however they take the risk of investing.

The kinds of shareholders in the business can be divided into two broad categories, those who own common shares and those who own preferred shares. It is also possible for companies to break these down by class, with different rights associated with the various types of shares.

Employees are often granted common shares as part of their compensation. They enjoy voting rights over business issues and are paid dividends from the profits of the business. When it comes to the right of assets to be liquidated in a business liquidation, they rank behind preferred shareholders.

Preferred shareholders, on the other hand are not able to participate in management decisions of the company. The dividend rate isn’t set and will fluctuate based on the performance of the company during any given year. Additionally the dividends are paid prior to the common shares are paid out in the event of liquidation. Shareholders can be granted other rights, for instance, the possibility of receiving a preferential or special dividend, or even no dividend.


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