Types of Shareholders in a Business

Shareholders can be organisations or individuals who invest money in a company by purchasing shares. They make a profit or loss on their investment based on performance of the company as well as its ability to pay dividends. They also get the benefit of capital appreciation, when the value of their shares rises over time. Shareholders' rights and privileges vary depending on state law, a company charter or bylaws.

In general there are two kinds of shareholders that are common stockholders (common stock) and preferred share holders. The majority of shareholders are common stockholders, and they have voting rights at shareholder meetings. They can review Website reports and participate in decision-making. Preferred shareholders can receive preferential dividends, and they have priority over ordinary shares in the event of liquidation.

The term “shareholders” can also refer to those who hold bonds and debentures issued by an organization. These are debt instruments which give the investor a certain amount of return. These investors are usually not directly involved in the running of the company, however their interests can be represented in the governance committee.

Investors who invest in shares of the company with a specific goal in mind, such as the acquisition of new markets or technologies, are known as strategic shareholders. This type of shareholder is an essential element of a family-owned business because they are aware of the project's scope and appreciate its potential, and are willing to take a risk in order to get a return on their investment.