What is a stockholder?

Definition of Stockholder

A stockholder (also known as a shareholder) is the owner of one or more shares of a corporation's capital stock. A stockholder is considered to be separate from the corporation and therefore has limited liability for the corporation's obligations.

Examples of Stockholders

An owner of a corporation's shares of common stock is referred to as a common stockholder. The common stockholders elect the corporation's board of directors and will vote on certain transactions such as merging the corporation with another corporation. Generally, it is the common stockholders who become wealthy when a corporation becomes increasingly successful.

In addition to common stock, some corporations also issue preferred stock. The owners of the shares
of preferred stock are known as preferred stockholders (or preferred shareholders). The preferred stockholders usually accept a fixed cash dividend that will be paid by the corporation before the common stockholders are paid a dividend. In exchange for this preferential treatment of dividends, the preferred stockholders typically forego the potential financial gains that the common stockholders might enjoy.

The amounts paid to the corporation by the original stockholders are reported as paid-in (or contributed) capital within the stockholders' equity section of the corporation's balance sheet.