A shareholder is an individual or entity that owns shares in a company and has the right to claim a part of its assets. Shareholders are able to make decisions within a corporation that affect its operations in the day-to-day and financial health. This could include appointing and taking directors off, deciding on the amount directors are paid and establishing dividend structure for the company. But, they aren’t held liable for the company’s debts.
In addition to having a share of the corporation’s profits shareholders also receive regular dividends and the right to inspect corporate books and records. Certain companies also offer incentives for shareholders like free samples of products or discounts on services. These perks are intended to encourage participation of shareholders and may differ from one company to the next.
Based on the type of stock, a shareholder could have additional rights as defined in the corporation’s charter and regulations. Common stock, for example, usually comes with voting rights. However, some corporations issue preferred stock, but does not have voting rights. Some stocks have conversion features, which permit shareholders to convert their shares at specific future dates into common stock.
Capital gains or dividends are the most frequent ways shareholders can earn money. They’re at risk, however, if the stock price drops or the company is unable to meet its financial obligations and has to liquidate its assets.