Shareholders are those who own shares in a company, and they receive benefits from the company’s success. A person can invest in a variety of ways as a shareholder whether it is a public or private company.
A shareholder may sell their shares to another investor to earn a profit. Capital gains are the result of an organization’s growing profits. Shareholders could be individuals or legal entities, and they may also be part of a corporation.
There are different types of shareholders and their rights and privileges depend on the type. For instance, some shares have voting rights while others don’t. Certain shares are also able to receive dividends in different ways than others. These rights are defined in the company’s charter or bylaws, as in the state laws.
The three main categories of shareholders include preferred, common, and institutional. Common shareholders are individuals who own the common stock of a company. They have the right to vote and influence corporate decisions and issues. Dividend payouts are based on the company’s profit. Preferred shareholders, on other hand, have priority over common shareholders with respect to dividend distribution. They also have greater rights to assets in the case of liquidation. Institutional shareholders are large companies like pension funds, hedge funds and mutual funds that own large shares in a business.
