Types of Shareholders in a Business
Shareholders are people who own shares in the company, and profit from the company’s performance. Investors can invest in many different ways as a shareholder whether it is a public or private business.
A shareholder can sell their shares to an investor in order to earn a profit. If the company’s profits rise and the value of shares will rise as well which is referred to as capital gains. Shareholders are individuals, legal entities or members of a corporation.
There are many types of shareholders in a business and the type they own determines their rights and privileges. Certain shares are eligible for voting rights and others don’t. Certain shares are also paid dividends in a different way than others. These rights are defined in the company’s charter or bylaws, as as in state laws.
The three main categories of shareholders include common, preferred and institutional. Common shareholders are people who own the common stock of a company. They are entitled to vote and have the ability to influence corporate decisions and issues. They also get dividend payments in proportion to the earnings of the company. Preferred shareholders have a higher priority than ordinary shareholders when it comes to dividend distribution. They also have a larger claim on assets in the event that the company is liquidated. Institutional shareholders are big organizations like pension funds, mutual funds, and hedge funds that own a significant amount of shares in the company.
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