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Shareholders, sometimes called "stockholders" by some state statutes, own shares of stock in a corporation which may either be a publicly held or a closely held corporation.

Types of shareholders include:

Shareholders elect a distinct group, known as the board of directors.

Shareholders may be paid a dividend by the corporation when there are profits and when the board of directors determines that dividends should be paid. Shareholders have no right to return of their invested funds from the corporation unless there is a dissolution of the corporation or the directors offer to buy back the shares. Thus, shareholders have no right to payments from the corporation and unlike creditors, a failure to pay them will not force the business into bankruptcy.

Shareholders in a publicy traded corporation may sell their shares in the stock market but the price depends on the success of the business. If the corporation is successful, the common shareholders benefit by the increased value while creditros are usually just entitled to their principial. Thus, compared to creditros, the shareholders have greater risk (lower priority than creditors) bt also the potential for greater return (increased profits benefit the shareholders).

Concepts

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