There are many terms which confuse people in the stock market like shareholders and stockholders. Many investors and traders search for Shareholder vs Stockholder to know the difference between stakeholder and stockholder as these two terms which are looking similar.
Before we get into the diffrence let’s understand both of them separately.
Table of Contents
What is a Shareholder?
A shareholder, sometimes known as a stakeholder, is a person, corporation, or institution that holds at least a part of a firm’s equity (stock).
Shareholders profit from a firm’s success because they are effectively proprietors of the firm.Rising stock prices or financial profits delivered as dividends are examples of these benefits.
When a corporation makes a loss, the share price lowers, which can result in shareholders losing money or seeing their portfolio values decrease.
Key Points
- A shareholder, also known as a stakeholder, is anyone who holds at least a portion of a business ‘equity
- As equity owners, shareholders are entitled to capital gains (or losses) and/or dividend payments as ultimate creditors on a business earnings.
- Shareholders also have specific rights, such as the ability to vote at shareholder meetings to authorize board members, dividend distributions, and mergers.
What is a Stockholder?
A stockholder is also known as a corporation investor or an individual who owns at least one share of a firm’s capital stock. Stockholders are primarily the company’s owners, and they often benefit from the business performance in the form of increasing stock valuation.
However, if the company’s value falls, stockholders may be forced to face losses as well. Stockholders, unlike the firm ‘s owner, are not accountable for the firm’s debt or any other financial commitments, and they do not control the company ‘s activities.
Types of Stockholders:
There are two types of Stockholders:
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Common Stockholder
The majority of stockholders own common stock since it is less expensive and more readily available than preferred stock. It is more adaptable and profitable. Common stockholders have voting rights on critical areas such as mergers and acquisitions.
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Preferred stockholder
Preferred stockholders receive a fixed dividend that is often higher than common stockholders and is paid before common stockholders. Stockholders do not have the ability to vote. Preferred stockholders are typically investors who want to earn an annual return on their investment.
Shareholder vs Stockholder (difference between stakeholder and stockholder)
Both the phrases stockholder and shareholder apply to people who possess shares in a corporation, implying that they are part-owners. As a result, both names refer to the same entity, and you can use either one when discussing business ownership.
To get into the technical aspects of the phrases, “stockholder” refers to the person who owns stock, which can be thought of as inventory rather than equity.
In contrast, “shareholder” refers to the owner of a share, which can only be an equity stake in a company. As a result, if you’re particular, “shareholder” might be the more technically correct phrase, as it exclusively refers to corporate ownership.
Rights of shareholders vs stockholders
A stockholder or shareholder has the same rights as a shareholder, which include the ability to vote for directors, receive dividends, and receive a share of any remaining assets upon a company’s liquidation.
There is also the option to sell any shares held, but this requires the availability of a bidder, which can be hard to come by when the market is small or the stocks are limited.
A stockholder or shareholder can also be an individual or a legal entity including a corporation or a trust.
Conclusion
Normally you can consider both of them as the same word. However, Professionally shareholders are used by exchanges and other legal entities like Securities and Exchange Board of India (SEBI).
This is all from our side regarding Shareholder vs Stockholder. Although, if you have any doubts about difference between stakeholder and stockholder you can just comment below.
Other Interesting blogs related to stockholders vs shareholders:
Difference Between Shares and Debentures
What is Expiry Date in Indian Stock Market
Difference Between Stock Market and Share Market
FAQ About stockholder vs shareholder
Types of shareholders?
There are three types of shareholders : Equity Shareholder, Debenture holders and Preference Shareholder.
Examples of shareholders?
Examples of shareholders are any person, corporation, or institution that holds at least a share of a firm’s equity.
Are shareholders internal or external stakeholders?
shareholders can be both internal or external stakeholders.
Shareholder theory
The shareholder theory holds that a company's sole responsibility is to maximise profits for its shareholders. This is the traditional understanding of a firm's purpose, because many people buy shares in a firm solely to make the highest possible return on their investment.
Which one is technically correct, shareholder or stockholder?
Share holder is technically correct & used by legal authorities and exchanges.
