💼 What is stock? 💼
A stock is a form of security that indicates the holder has proportionate ownership in the issuing corporation.
💼 A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares.
💼 This typically entitles the stockholder (shareholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested.
💼 Not all stock is necessarily equal, as certain classes of stocks may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.
💼 Corporations issue (sell) stock to raise funds to operate their businesses.
💼 Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and they are the foundation of nearly every portfolio.
💼 The holder of stock (a shareholder) has now bought a piece of the corporation and, depending on the type of shares held, may have a claim to a part of its assets and earnings.
[In other words, a shareholder is now an owner of the issuing company.]
💼 Ownership is determined by the number of shares a person owns relative to the number of outstanding shares.
For example,
If a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets and earnings.
⚠️ Stock holders do not own corporations: they own shares issued by corporations.
💼 But corporations are a special type of organization because the law treats them as legal persons.
[In other words, corporations file taxes, can borrow, can own property, can be sued, etc.]
💼 The idea that a corporation is a "person" means that the corporation owns it's own assets.
💼 A corporate office full of chairs and tables belongs to the corporation, and not to the shareholders.
💼 This distinction is important because corporate property is legally separated from the property of shareholders, which limits the liability of both the corporation and the shareholder.
💼 If the corporation goes bankrupt, a judge may order all of its assets sold - but your personal assets are not at risk.
💼 The court cannot even force you to sell your shares, although the value of your shares will have fallen drastically.
💼 Likewise, if a major shareholder goes bankrupt, he cannot sell the company's assets to payoff her creditors.
Adam Hayes
@FinancialFreedomMagazine
A stock is a form of security that indicates the holder has proportionate ownership in the issuing corporation.
💼 A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares.
💼 This typically entitles the stockholder (shareholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested.
💼 Not all stock is necessarily equal, as certain classes of stocks may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.
💼 Corporations issue (sell) stock to raise funds to operate their businesses.
💼 Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and they are the foundation of nearly every portfolio.
💼 The holder of stock (a shareholder) has now bought a piece of the corporation and, depending on the type of shares held, may have a claim to a part of its assets and earnings.
[In other words, a shareholder is now an owner of the issuing company.]
💼 Ownership is determined by the number of shares a person owns relative to the number of outstanding shares.
For example,
If a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets and earnings.
⚠️ Stock holders do not own corporations: they own shares issued by corporations.
💼 But corporations are a special type of organization because the law treats them as legal persons.
[In other words, corporations file taxes, can borrow, can own property, can be sued, etc.]
💼 The idea that a corporation is a "person" means that the corporation owns it's own assets.
💼 A corporate office full of chairs and tables belongs to the corporation, and not to the shareholders.
💼 This distinction is important because corporate property is legally separated from the property of shareholders, which limits the liability of both the corporation and the shareholder.
💼 If the corporation goes bankrupt, a judge may order all of its assets sold - but your personal assets are not at risk.
💼 The court cannot even force you to sell your shares, although the value of your shares will have fallen drastically.
💼 Likewise, if a major shareholder goes bankrupt, he cannot sell the company's assets to payoff her creditors.
Adam Hayes
@FinancialFreedomMagazine