Business Terms Glossary

Common Stock

Definition of Common Stock

Common stock is a share in the ownership of a corporation.

Typically held by founders and employees, common stock defines the holder's equity interest in a company.

In the case of a public company, the stock is traded between investors on public exchanges. Common stock in private companies is considered illiquid relative to common stock in public companies.

Owners of common stock have various rights. For example, they may be entitled to vote for company directors.

In some cases, common stock holders will receive dividends on their holdings. Investors who purchase common stock hope that the stock price will increase so the value of their investment will appreciate.

Common stock offers no performance guarantees per se. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock have precedence over the equity claims of those who own common stock.

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