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A shareholder is a person or institution that has invested money in a corporation in exchange for a “share” of the ownership. That ownership is represented by common or preferred shares issued by the company and held (i.e., owned) by the shareholder.

Common and preferred shares have different prices, entitle shareholders to different proportions of the company’s profits, and may or may not come with voting rights (i.e., the right to participate in company decision-making).

Shareholders of small and medium-sized private companies are often closely involved in the management of the business. This is much rarer in larger, publicly traded corporations, where teams of managers are responsible for day-to-day decisions.