The Difference Between Stakes, Shares and Stocks

The Difference Between Stakes, Shares and Stocks
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In exchange for a sum of money or professional services, individuals and institutions can become partial owners of a company. Stock, shares and stakes are all terms that can be used to refer to this type of company ownership. The words stake and stakeholder, however, often refer to nonowners instead of owners.

Corporate Stock and Shares

Stock describes corporate ownership in a general sense. Both S corporations and C corporations refer to company equity as stock. The term shares is used to express units of company ownership. An investor, for example, could say he owns 100 shares of common stock in a corporation.

A corporation can choose to issue different classes and different types of stock. Stock can come with varying degrees of voting rights when it comes to corporate decisions. For example, some stock may give the owner the right to five votes per share of stock, and some stock offers no voting rights. A company can also issue preferred stock, which gives the owner the right to receive more dividends than common stock offers. Corporations must list the value of outstanding common stock and preferred stock in the equity section of the business balance sheet.

Company Stakes

Stake can also be used to express ownership of a company. Limited liability companies and partnerships, for example, don't use the word stock when referring to company ownership; they use equity stake or member interest.

The word stake, however, can have different meanings in a business setting. Having a stake in a company simply means you have a vested interest in the company's success.

Tip

An employee can have a stake in a company's success even if he doesn't own any company stock.

Stockholders and Shareholders Versus Stakeholders

The terms shareholders and stockholders are used interchangeably to refer to individuals or companies that own shares of stock. Stakeholder, however, is rarely used to describe company owners. Instead, it's used to refer to a nonowner who benefits from the company or is affected by the company's decisions.

AccountingCoach.com notes that employees, employee families, business suppliers, customers and the local community are all potential stakeholders in a business. Individuals and institutions that hold company debt, such as bondholders and the company's bank, are also significant stakeholders.