What is common stock?

Common stock is a type of equity ownership in a corporation, representing a claim on part of the corporation's assets and earnings. Common shareholders typically have the right to vote on major corporate issues, such as electing the board of directors and authorizing major corporate initiatives.

Each share of common stock represents a proportional ownership, or stake, in the company. If the company is successful, shareholders can benefit from increased stock prices and/or dividends. However, if the company fails, common shareholders are last in line to receive any remaining assets after debts and preferred shareholders are paid. For this reason, common stock is considered riskier than debt or preferred shares. In startups, common stock is often issued to founders and employees, while preferred stock is typically issued to investors.