Common stock is a type of equity ownership in a corporation. Typically, the holders of common stock have a right to receive the income and assets of the company after all other claims have been satisfied. Common stock has lower priority than debt and preferred stock, but it may have greater upside, as debt typically has a fixed claim, whereas common stock is variable. Because common stock has more risks, it's given substantial control over the company in the form of voting rights to elect the board of directors which will manage the company.
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Common and Preferred Stock: What's the Difference?
Common stock does not sound exciting. Preferred stock does. First-time founders are looking for excitement—especially when it comes to their millions of initial shares—and so they’re often surprised to hear that they’ll be receiving common, rather than preferred stock when the startup is incorporated.
