What is a Shareholder?
A shareholder is a person, company, or institution that owns at least one share of a company’s stock or in a mutual fund. Shareholders essentially own the company, as their ownership stake gives them certain rights, such as voting power and receipt of dividends. The ownership stake of each shareholder is determined by the number of shares that they own in the corporation.
Issuing Shares of a Corporation
When a company wants to raise money, it can do so by selling shares of its company. This is called equity financing, and it is a way for the company to essentially sell ownership of its company in exchange for cash. The money received from this equity financing can be used to fund the company’s operations and growth. The shares that are sold are known as issued shares, and they can include both shares of stock that are publicly available and those that are held by private investors.
Ownership Stake of Each Shareholder
The ownership stake of each shareholder is determined by the number of shares that they own in the company. For example, if a company has 1,000 shares and a shareholder owns 100 of them, then they own 10% of the company. Depending on the type of stock that they own, they may also be entitled to additional rights, such as voting power and dividends.
Types of Shares
There are two main types of shares that a company can issue: common stock and preferred stock. Common stock is the most widely held type of share, and it gives the shareholder certain rights, such as voting power and the right to receive dividends. Preferred stock is another type of equity that represents ownership in the company, but it gives the shareholder more rights than common stock, such as the right to receive a higher dividend and priority when it comes to liquidation.
Who Owns a Corporation?
The ownership of a corporation can be spread across many different investors, such as individuals, trusts, and other businesses. For example, the Los Angeles Lakers are owned by a consortium of business moguls, with ownership stakes spread across a variety of individuals and trusts.
Benefits of Being a Shareholder
Being a shareholder of a corporation can be beneficial in a number of ways. For example, shareholders can receive dividends, which are payments made to shareholders by the company out of its profits. Shareholders may also benefit from capital gains, which are profits made when the company’s stock price rises. Finally, shareholders may benefit from the appreciation of the company’s stock price over time.
Summary
A shareholder is a person, company, or institution that owns at least one share of a company’s stock or in a mutual fund. The ownership stake of each shareholder is determined by the number of shares that they own in the corporation. Companies can issue two main types of shares: common stock and preferred stock. The ownership of a corporation can be spread across many different investors, such as individuals, trusts, and other businesses. Being a shareholder of a corporation can be beneficial in a number of ways, such as receiving dividends, capital gains, and the appreciation of the company’s stock price.
