Common Stock vs. Preferred Stock: What is the Difference?

HNWBusiness Law, Shareholder Rights Litigation

By Fredrick P. Niemann, Esq., a NJ Shareholder Attorney
Purchasers of stock in a corporation all have shareholders rights. These rights differ depending on the corporation and what type of stock it is. There are two main types of stock, Common Stock and Preferred Stock. The type of stock a shareholder owns can have a significant impact on what rights they have as a shareholder in a NJ Corporation.

Common stock is the lowest level of stock in a corporation. The rights of common stockholders are determined by the company’s Articles of Incorporation and its Bylaws. Typically, these rights are less than the rights of preferred stockholders. While common stock can be a valuable asset to investors, this is only when the corporation is successful. If a corporation is not successful or goes out of business, the stock maintains little value. Owners of common stock are the first to lose their investment and last to receive any piece of the money received when the corporation sells its assets. It is also important to note that sometimes corporations have different types of common stock that assign specific rights to each type, such as nonvoting and voting common stock.

Unlike common stock, preferred stockholders typically have the right to receive fixed dividends from the corporation. They also have a right to receive financial considerations from the liquidation of corporate assets. The dividend rights of preferred shareholders differ from those of common shareholders in the fact that preferred holders have a right to receive a guaranteed percentage of declared dividends before the remainder is distributed to the common shareholders.

Contact me personally to discuss your NJ Shareholder matter. I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns. You can reach me toll-free at (855) 376-5291 or email me at

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