what is a shareholder 
a shareholder is a person company or institution that owns at least one share of a company s stock or a share of a mutual fund shareholders essentially own the company which comes with the right to share in the profits if a company is successful shareholders benefit from increased stock valuations or profits distributed as dividends shareholders also have the right to participate in corporate elections conversely when a company loses money the share price drops which can cause shareholders to lose money if the company fails shareholders can claim any remaining assets after the company s debts are paid yurle villegas investopediaunderstanding shareholdersas noted above a shareholder is an entity that owns one or more shares in a company s stock or mutual fund being a shareholder or a stockholder as they re also often called comes with certain rights and responsibilities along with sharing in the overall financial success a shareholder is also allowed to vote on certain issues that affect the company or fund in which they hold shares a single shareholder who owns and controls more than 50 of a company s outstanding shares is called a majority shareholder in comparison those who hold less than 50 of a company s stock are classified as minority shareholders most majority shareholders are company founders in older more established companies majority shareholders are frequently related to company founders in either case these shareholders wield considerable power to influence critical operational decisions including replacing board members and c level executives like chief executive officers ceos and other senior personnel when they control more than half of the voting interest that s why many companies often avoid having majority shareholders among their ranks unlike the owners of sole proprietorships or partnerships corporate shareholders are not personally liable for the company s debts and other financial obligations therefore if a company becomes insolvent its creditors cannot target a shareholder s personal assets shareholders are entitled to collect proceeds left over after a company liquidates its assets however creditors bondholders and preferred stockholders have precedence over common stockholders who may be left with nothing after all the debts are paid special considerationsthere are a few things that people need to consider when it comes to being a shareholder this includes the rights and responsibilities involved with being a shareholder and the tax implications according to a corporation s charter and bylaws shareholders traditionally enjoy the following rights it is important to note that if you are a shareholder any gains or losses you make when selling shares need to be reported on your personal income tax return gains would contribute to your taxable income and losses will be deducted from your taxable income 2 any dividends paid to shareholders are also taxable income 3another type of corporation with different tax treatment is an s corporation these are typically small size to midsize businesses that have fewer than 100 shareholders the s corporation differs from a regular corporation in that it has pass through taxation rather than double taxation of a regular corporation when selling shares shareholders incur taxable capital gains or loses just like with shares of a regular corporation according to the internal revenue service irs shareholders of s corporations report the flow through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates this allows s corporations to avoid double taxation on the corporate income s corporations are responsible for tax on certain built in gains and passive income at the entity level 4this is opposed to shareholders of c corporations who are subject to double taxation profits within this business structure are taxed at the corporate level and at the personal level for shareholders 5it is a common myth that corporations are required to maximize shareholder value this may be the goal of a firm s management or directors but it is not a legal duty types of shareholdersmany companies issue two types of stock common and preferred common stock is more prevalent than preferred stock and is what ordinary investors typically buy in the stock market generally common stockholders enjoy voting rights but preferred stockholders do not however preferred stockholders have a priority claim to dividends furthermore the dividends paid to preferred stockholders are fixed even if profits decline common stock dividends may decline or not be paid at all during periods of poor corporate performance some companies further divide their share issues into separate classes with different voting rights for example a share in a company s class a stock might come with ten votes while class b shares might have only one vote although there are no hard rules class a shares tend to have the highest voting power 