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What are shares of a corporation?

Shares of a corporation, also called stock, are representations of ownership in a corporation.  A corporation is a legal entity that is considered a ‘person’ with similar rights and privileges that human beings enjoy.  Corporations can own property and sign contracts and be sued like real human beings.  Unlike human beings, a corporation can be owned by people and can be bought and sold among people.

Due to the legal structure of corporations the people who own shares of the corporation, also called shareholders, can only lose the amount of ownership, or number of shares, they have in the corporation.  Their homes, cars, bank accounts, and other assets cannot be affected by the problems of the corporation that they own shares of.  At the same time the corporation is not affected by problems of its shareholders if the shareholders should owe more than they can pay on a loan, or be sued for loses due to their actions.

On the other hand, people can buy shares of a corporation and then have the right to a proportionate share of the profits.  The shareholders do not have the right to access or use the assets of the corporation such as the computers, tables, chairs, buildings, and other assets.  As shareholders people can vote the number of shares they have to influence the direction and behavior of the corporation through the board of directors.  One way to share in the profits of the corporation is to be paid a proportionate amount of the money left after expenses through dividends.

John

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