What Is a Shareholder?

What Is a Shareholder?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

A shareholder is an individual or entity that owns shares in a corporation, making them part owners of the company. Shareholders can receive shares through a company’s initial public offering (IPO) or by buying shares on the open market. The number of shares they own determines their level of ownership. Being a shareholder comes with certain rights such as voting on policies and deciding on board members. They may also receive a portion of the company’s profits, typically distributed as dividends.

Related Questions

1. What is a dividend?

A dividend is a payment made by a corporation to its shareholders. It’s often derived from the company’s earnings. The board of directors decides if dividends will be paid and how much they will be, usually on a per-share basis.

2. How does a shareholder make money?

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A shareholder can make money in two ways – through dividends or by selling their shares at a higher price than they bought them for, known as capital gains.

3. What are common and preferred shares?

Common shares give owners voting rights but they’re last in line to receive any remaining assets if the company goes bankrupt. Preferred shares, however, typically don’t provide voting rights but do offer a higher claim on assets and earnings, including dividends.

4. How does one become a shareholder?

To become a shareholder, an individual or entity would need to buy shares in the company. This can be done through a stockbroker or an online trading platform.

5. What responsibilities do shareholders have?

Shareholders generally don’t have any responsibilities in the company’s day-to-day operations. Their main role typically involves voting on major company decisions or nominating board members.