The Types of Shareholders in a Business

A shareholder is anyone or a corporation who holds part ownership in a business by purchasing shares on the stock exchange. Shareholders earn rewards when the company succeeds in enhancing its stock valuation and financial returns through dividends. Shareholders don’t have to personally be responsible for the obligations or debts of the company, however they are taking the risk of investing.

Shareholders can be divided into two broad categories: those who own common shares and those who hold preferred shares. It is also possible for companies to further break them down on a class basis, with different rights being attached to the various classes of shares.

Common shares are usually given to employees as a percentage of their pay with the holders gaining the right to vote on issues that affect the company and also receiving dividends from the company’s profit. They rank after preference shareholders when it comes to the right companylisting.info/2021/04/15/how-to-register-a-business-name/ to assets in the event of liquidation.

Preferred shareholders, on the other hand do not have the right to participate in management decisions of the company. They also do not get an annual fixed dividend rate and the rate may change depending on the profit situation of the business in any particular year. They are also paid before the common share is dissolved in the event of liquidation. It is also possible for shareholders to enjoy a number of additional rights, including the right to a preferential dividend, a special dividend or even no dividend at all.