What is a 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 as a result will have limited liability as far the corporation's obligations.

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

In addition to common stock, some corporations also issue preferred stock. An owner of these shares is known as a preferred stockholder (or preferred shareholder). A preferred stockholder usually accepts 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 stockholder will forego the potential financial gains that may occur for the common stockholder.

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