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Types of Shareholders in a Business

Shareholders are the people who own shares in the company, and get benefits from the company’s performance. One can be a shareholder in a public or private business, and they can invest in many different ways.

A shareholder may sell their shares to an investor to earn a profit. Capital gains are the result of a company’s increasing profits. Shareholders are legal entities, individuals or members of a corporation.

There are many types of shareholders in a company and the type of shares they have determines their rights and privileges. Certain companylisting.info/2021/04/15/how-to-register-a-business-name/ shares have voting rights however, others don’t. Certain shares are also paid dividends in a different manner as compared to other shares. These rights are outlined by the bylaws or charter of the company and state laws.

Common, preferred, institutional, and other types are the primary types of shareholders. Common shareholders are the individuals who own the company’s common stock, and they enjoy the right to vote on corporate issues and business decisions. They also get dividend payments based on the profit of the company. Preferred shareholders have priority over ordinary shareholders in dividend distribution. They also have a greater claim on assets in the event that a company is liquidated. Institutional shareholders are large companies such as hedge funds, pension funds, and mutual funds that hold significant shares in the business.