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If I own a company, how do shareholders benefit me? How do I benefit shareholders?
Learning about owning a company and what is important to have.
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Jeffrey’s Answer
In a nutshell, shareholders benefit you as they provide capital for your business in exchange for partial ownership as described in a previous answer. This can take many forms, and as an owner/business leader, you get to decide how much of your business you would allow others to "buy", typically in order to fund capital intensive projects or investments you want to make in growing your team, your inventory, marketing, etc.
One thing to note is that these shareholders can take many forms - could be common shareholders on a public market, but they could also be venture capital investors or even friends and family members who want to support you.
One additional shareholder type you may want to consider are advisors and/or board of director members. In this case, you'd typically offer "shares" in your business in exchange for their time and advice to help you build/run/grow your company. Again, the number of shares you offer is up to you, but the benefit here is you get access to their experience, business insights, and perhaps even their personal/professional networks and that can make a huge difference especially as you're just starting to get your business off the ground.
Hope that helps, and GOOD LUCK!
One thing to note is that these shareholders can take many forms - could be common shareholders on a public market, but they could also be venture capital investors or even friends and family members who want to support you.
One additional shareholder type you may want to consider are advisors and/or board of director members. In this case, you'd typically offer "shares" in your business in exchange for their time and advice to help you build/run/grow your company. Again, the number of shares you offer is up to you, but the benefit here is you get access to their experience, business insights, and perhaps even their personal/professional networks and that can make a huge difference especially as you're just starting to get your business off the ground.
Hope that helps, and GOOD LUCK!
Updated
Fred’s Answer
Well...if you have shareholders, technically you don't own the company. To GET shareholder, you offer to sell shares in your company. You may decide your company should have 1,000,000 shares. You own them all. You decide you will sell some of them...say, 400,000. (there are a lot of requirements to get a company listed on the market, but that's a different question).
So let's say you sell all 400,000 at $10 each. You now have $4million in cash you can use. You can re-invest it in your company. you can take a trip to Tahiti. You can blow it at a casino.
But let's assume you re-invest it in your company, expanding it into new markets, increasing sales, thus increasing revenue. Those share you sold are no longer yours, but they can be traded on the open market. Maybe the share value goes up, and they now trade for $40 each. You could sell more of your 600k shares and get more money if you want. You can sell any/all of your shares. You can buy them back. There are restrictions on when you can do this, but again, that is a more complicated question.
So that's how shareholders can benefit you.
You benefit shareholders in two ways. Theoretically, if you improve the business and the share value goes up, they can sell and make a profit. But also, if the BUSINESS makes a profit, that is often distributed to the shareholders. If after ALL expenses are paid, all investements are made, and so on, if there is money left over, it's paid as a dividend to the shareholders. If there is $1million left over, owners get $1 per share that they own. Dividends may be paid out quarterly or yearly, or not at all.
Now, the trade off is that shareholders get to vote on the direction of the company. You may have heard of a "shareholder meeting". Everyone who owns at least one share can attend, and gets one vote per share. So as long as you own more than half the shares (in this example, 500,001 shares), you control the company, as you can't be out-voted. But if you sell more than half the shares, people can group together and out-vote you. Sometimes, you'll hear about a hostile takeover, or a shareholder revolt. This is where someone or some group get control of more than half the shares and takes over the company. They can even fire you as the CEO (assuming you are). You still own your shares in the company, but you may not have enough votes to make the company do what you want.
So let's say you sell all 400,000 at $10 each. You now have $4million in cash you can use. You can re-invest it in your company. you can take a trip to Tahiti. You can blow it at a casino.
But let's assume you re-invest it in your company, expanding it into new markets, increasing sales, thus increasing revenue. Those share you sold are no longer yours, but they can be traded on the open market. Maybe the share value goes up, and they now trade for $40 each. You could sell more of your 600k shares and get more money if you want. You can sell any/all of your shares. You can buy them back. There are restrictions on when you can do this, but again, that is a more complicated question.
So that's how shareholders can benefit you.
You benefit shareholders in two ways. Theoretically, if you improve the business and the share value goes up, they can sell and make a profit. But also, if the BUSINESS makes a profit, that is often distributed to the shareholders. If after ALL expenses are paid, all investements are made, and so on, if there is money left over, it's paid as a dividend to the shareholders. If there is $1million left over, owners get $1 per share that they own. Dividends may be paid out quarterly or yearly, or not at all.
Now, the trade off is that shareholders get to vote on the direction of the company. You may have heard of a "shareholder meeting". Everyone who owns at least one share can attend, and gets one vote per share. So as long as you own more than half the shares (in this example, 500,001 shares), you control the company, as you can't be out-voted. But if you sell more than half the shares, people can group together and out-vote you. Sometimes, you'll hear about a hostile takeover, or a shareholder revolt. This is where someone or some group get control of more than half the shares and takes over the company. They can even fire you as the CEO (assuming you are). You still own your shares in the company, but you may not have enough votes to make the company do what you want.
Katherine Avery
Run a music studio and teach private music lessons; teach college-level religion classes
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Katherine’s Answer
Hey Jumah,
I think you can get a little better idea of what these things are like if you read Dave Ramsey's book EntreLeadership. That can help you decide what you would want to do.
I think you can get a little better idea of what these things are like if you read Dave Ramsey's book EntreLeadership. That can help you decide what you would want to do.