Preferred Stock

A class of stock that usually pays a fixed dividend and has priority over common stock in the event of liquidation.

Preferred stock refers to a type of ownership or investment in a company that provides certain advantages over common stock. Small business owners may issue preferred stock to raise capital from investors. Preferred stockholders have a priority claim on company assets and receive fixed dividends before common stockholders. Unlike common stockholders, they typically do not have voting rights. Preferred stock can offer stability and regular income to investors, making it an attractive option for those seeking steady returns. Additionally, in the event of liquidation or bankruptcy, preferred stockholders are generally paid before common stockholders. By understanding the concept of preferred stock, small business owners can effectively navigate the process of raising funds and structuring ownership in their company.