A shareholder is a person, or a company that holds a part-ownership of a business through the purchase of shares in the market for stocks. Shareholders receive a reward when the business is successful in increasing its stock valuation and financial earnings in the form of dividends. Shareholders don’t have to personally be responsible for the obligations or debts of the company, however they are taking on an investment risk when they invest.

The types of shareholders in a business can be bifurcated into two broad categories namely those who own common shares and those who hold preferred shares. It is also possible for businesses to further divide these shares on a class basis with http://companylisting.info/2021/04/21/creating-an-llc-what-are-the-disadvantages/ different rights being associated with the various classes of shares.

Common shares are often given to employees as part of their pay, with the holders enjoying voting rights on matters which affect the business as well as also receiving dividends from the company’s earnings. They rank after preference shareholders when it comes to the rights to assets in the event of the event of a liquidation of a business.

Preferred shareholders However, they do not have the right to take part in the management decisions of the company. The dividend rate is not fixed and will change depending on the profitability of the company during any given year. They also get paid prior to the common share is dissolved in a company’s liquidation. It is possible for shareholders to be granted various additional rights, including the right to receive a preferential dividend or a special dividend, or no dividend at all.