 In this discussion, we will discuss the discussion question of what does it mean to be a common stockholder? So the common stockholder first we would define it as the owners of a corporation So if we see an essay question like this, we may first want to discuss. Okay What is a corporation briefly compared to other types of legal entities? What is a stockholder? What does it mean to be an owner? So a corporation unlike other legal and other types of entities is a separate legal entity Unlike a partnership or a sole proprietorship. So the corporate structure then differs from the partnership or or a sole proprietor in that we don't just really have a capital account for each individual owner Instead we're going to issue stock and that's going to be one of the huge benefits to a corporation It does have some cons too, but it's one of the general benefits of a corporation is that all these stocks are going to be uniform standardized and then the difference between the owners then is not going to have to be tracked individually by owner But is tracked instead by how many stocks they have how many how many shares they have So what do these shares give the owners of the corporation? We can think of the corporate structure is going to be Like kind of a step removed from say a partnership the general partnership who is acting directly You can think of it almost like a government structure and a democracy meaning We've got the owners that would vote for the board of directors typically and the board of directors would then Hire management which would then run the country run the business So in a similar fashion as we vote for you know people who represent us who then make you know Decisions and hire people to actually make decisions on a government level same You could think of it at that at that level and that therefore we're going to be a step removed You can see that if we're a large corporation and we're investing in a large corporation Especially if we're investing like a mutual fund or something we have ownership through that But we own a very small amount and what does that small amount do then? Obviously, we're not making direct day-to-day decisions in that type of situation What we do have the right of as stockholders is is to vote on stockholder meetings and one of the primary things we can we can vote on is The people representing us the board of directors that are representing there who can then hire management Who then commit hire employees then acting as agents supposedly on behalf of the stockholders Just like the Congress people are supposedly acting on behalf of citizens So that's going to be the we have voting power for for the stock now Clearly if it's a closely held company then it's possible for one individual to have 51% of the voting power And then of course they would have control because they would win any vote. They have 51% Of the shares so if we have less than 51 if we're a very small stakeholder So if we have a few stocks and like Apple or something then it's kind of like us voting for a congressperson or a senator We have a very we have a vote, but it's not a significant in terms of the total still counts, right? So that's going to be one of them the major benefits. We have another benefit We have as a stockholder is that even if we are a small little person little stockholder We don't have a whole lot of stocks. We are entitled to dividends meaning If the corporation decides to give a dividend What that means is they're going to take money out of retained earnings And they're going to give it to the stockholders and you can think of this like if we're a sole proprietorship Clearly we put money into the business. We hope the business will generate revenue We then take that revenue after the business has generated it and give it to ourselves in the format of Draws so that we can then take that money and use it for personal use instead of business use Same thing happens for a corporation Except that we cannot just give a draw to an individual like we would with a partnership and have each partner Decide how much they want as a draw in accordance with certain rules and their partnership capital account In a corporation if we give some of that money back to somebody we have to give it to all stockholders In an even amount So for example, if we were in a situation where one individual has 51% of the stocks and we have one stock Then that that person that has 51% although they have all the power for any vote Cannot go to the corporation and say I want a dividend given to me and my 51 shares I'm voting for that and not give the same proportional dividend to all other stockholders who are owning stock Can't do that because all the stocks are the same and part of the rights of a stock Is that you're gonna get whatever dividend is declared? So what that 51% shareholder could do is is influence and say we're not we're gonna I'm gonna exercise my influence and not basically Provide us a dividend so nobody gets a dividend meaning the corporate will get corporation will just hold on to it Or they can decide how much of a dividend will be given But however much a dividend is given will then need to be given evenly to the stockholders because they're all the same That's the point of the stocks. They're all they're all the same. So having 51. They'll get 51 times however much per stock and us having one stock will get one stock times how much per stock But they all have all stocks have to be the same amount of distribution We also have rights in terms of if there is a liquidation meaning if the corporation goes under if the corporation closes for whatever reason We don't have a lot of control over that if we don't have much stock again on the to say whether they should liquidate or not We can give influence through voting again But if it's determined if they decide the board of directors and management decide to liquidate the company What we do have the right to is an equal distribution of after they sell the assets and pay off the liabilities An equal distribution to however, it's going to be distributed to the rest of the stockholder Meaning again, the 51% stockholder can't take all the revenue and give us even though we have no power and voting rights with our one stock They can't just take all the all the revenue. They have to they have to give it out evenly to all stockholders That's that's the point of the stock. It has to be all even so within revenue revenue and dividends being given out and Liquidation process the distributions need to be the same per stock