Types of Shareholders in a Business

Shareholders are people who own shares of an organization, and get benefits from the company’s success. One can invest in various ways as a shareholder whether it’s a public or private business.

A shareholder may sell their shares to an investor in order to earn a profit. If a business’s profits grow then the value of the shares will increase too and is referred to as capital gains. Shareholders are legal entities, individuals or members of a corporation.

There are various kinds of shareholders in a business and the type of shares they are based on determines their rights and privileges. For instance, certain types of shares have voting rights whereas others do not. Certain shares are also paid dividends in a different method as compared to other shares. These rights are outlined by the bylaws or charter of the company and the laws of the state.

The most popular categories of shareholders are common, preferred and institutional. Common shareholders are people who hold the common stock of a company. They are entitled to vote and can influence corporate decisions and decisions. Dividend payouts are based on the company’s profit. Preferred shareholders are more favored than ordinary shareholders in dividend distribution. They also have a greater claim on assets in the event that the company is liquidated. Institutional shareholders are large corporations such as pension funds, mutual registering your business name funds, and hedge funds which own a significant amount of shares in a company.