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A shareholder is a person, company or other entity that owns at least one share of a company’s stock.

Another word for shareholder is stockholder. When shareholders buy a company’s stock, they provide it with funds to run and grow its business. In return, they own a percentage of the company, usually a small fraction, depending on how many shares they buy. And with that ownership comes certain risks and rights.

On the plus side, shareholders are not personally liable for a company’s debt. Common stockholders can vote on company matters, including mergers and who sits on the board of directors. And shareholders can trade their shares, making them a liquid investment. Shareholders can also attend annual meetings to learn about the company’s performance.

On the downside, while a shareholder can inspect the company’s records and sue if misdeeds are made, she has a lower right to proceeds if the company must liquidate. On such an occasion, the claims of creditors and bondholders will be addressed first.

If the company does well, shareholders stand to profit from paid dividends or share appreciation. But if the company struggles, its shareholders figure to lose.

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