Owners of a Corporation: Shareholders

Study Notes

Owners of a Corporation: Shareholders

In a corporation, ownership is represented by the holding of stock shares, commonly referred to as shares. Shareholders are the owners of a corporation and are typically the original investors when a corporation is first formed. They have an ownership interest in the company through their investment in the corporation. Each share represents a fractional ownership of the company, and the value of a single share can range from less than a 1% interest in the corporation to 100%.

How Shareholders Acquire Ownership

Shareholders acquire ownership by investing money into the corporation, leading to the issuance of stocks representing their pro-rated ownership in the company. In a private company, the ownership structure remains largely static unless additional shares are issued or existing ones are transferred. On the other hand, in publicly traded corporations, ownership can fluctuate continuously as shares are bought and sold in the stock market.

Types of Shareholders

A corporation can have various types of shareholders, including private investors and members of the general public if the corporation goes public. Private corporations usually have a smaller pool of shareholders who are typically involved in day-to-day operations as business owners, managers, or employees of the corporation. Majority shareholders, holding more of the company's stock, have more influence, such as the power to elect board members and make major decisions.

Shareholders' Rights and Obligations

Shareholders have certain rights and obligations associated with their ownership of a corporation. They are entitled to elect the corporation's directors during the annual shareholder meeting and may participate in special shareholder meetings for significant corporate decisions. Additionally, shareholders must comply with any restrictions outlined in the shareholders' agreement, which generally includes maintaining confidentiality and not competing against the corporation.

Shareholder Meetings

Corporations are obligated to hold annual shareholder meetings. During these meetings, shareholders vote on the election of directors and other matters requiring shareholder approval, such as major transactions or changes in the stock plan.

Description

Learn about shareholders in a corporation, their acquisition of ownership through investing in stocks, different types of shareholders, their rights and obligations, and the significance of shareholder meetings in corporate governance.