What is common stock?

Common stock is the standard unit of ownership created when a company is first formed. Generally, the articles of organization will state the company is authorized to issue a specific number of common shares, which are typically split between the founders. Some founders may choose to reserve a certain percentage of common stock to issue at a later date in conjunction with the exercise of employee stock options or for future equity offerings. Common stockholders are given voting rights, making them responsible for the election of the company’s board of directors, as well as voting on corporate policy. Any dividend payments authorized by the company’s board of directors are made to common stockholders after debt investors are paid interest owed and preferred stockholders have received their full payout. In the event of bankruptcy or liquidation, common stockholders have the least claim over company assets.