Both public and private corporations can issue common shares. Common shareholders are the owners of a company and initially provide the equity capital to start the business.
Common share ownership in a public company offers many benefits to investors. The following are some of its main advantages:
Marketability – shares can easily be bought or sold
Dividend tax credit and capital gains tax
While interest payments are guaranteed to bond holders, dividends are payable to shareholders at the discretion of the directors of a company.
Preferred stock is a class of share capital that entitles shareholders to fixed dividends ahead of the company’s common shares and to a stated dollar value per share in the event of liquidation.
Typically, the preferred shareholder occupies a position between that of a company’s creditors and its common shareholders. If a company’s ability to pay interest and dividends suffers due to poor earnings, the preferred shareholder is better protected that common shareholders but worse off than creditors.