When you hear about stocks, it’s usually in the context of the stock market, where people buy and sell shares in companies in the hopes of turning a profit. But what, exactly, is it? What does it mean to have stock in a company, and what can you do with it besides sell it on the market?
Put simply, a stock (otherwise known as a share) represents partial ownership of a corporation. That means, by default, you are entitled to a portion of the company’s profits (in the form of dividends) and are entitled to vote at that company’s shareholder meetings. Each share of a corporation represents an equal portion of that company’s ownership, so if a corporation has issued ten shares, buying two of them would mean you own 20% of that company, which would mean you’d get 20% of the company’s dividend payouts, and would have 20% of the votes at the shareholder meetings.
However, that’s merely the default for how stocks function. Companies are permitted to create “classes” of stock, which have differing rights from one another. For example, some companies will issue “non-voting” shares in addition to their regular stock, which are entitled to a portion of the company’s dividends but cannot vote at shareholder meetings. Other times, they will issue shares with different priorities for dividend payouts, so when the company issues a dividend, their “A” stock would get paid first, followed by their “B” stock (and then their “C” stock, if they have it). In that case, if there wasn’t enough money to pay dividends to all the shareholders, the lower-class shares would receive a lesser payout, or possibly no payout at all.
If you’re interested in exploring how organizing your company’s stock might affect you, or if you’re a shareholder who believes your rights were violated, you’ll need skilled legal counsel to help protect your interests. The New York business lawyers at Blodnick, Fazio & Clark are experienced legal professionals who can assist and guide you through the process. For more information or to schedule a consultation, contact our Long Island business lawyers at (516) 280-7105 or (631) 669-6300.