What is a shareholder?

Definition of a shareholder

A shareholder is a person who owns shares in a limited company.

A limited company is a separate legal entity in its own right that can own assets and incur debts.

The company itself needs to be owned by one or more people. Ownership of a company is given by ownership of shares. If a company has only one shareholder, that individual will own all the company’s shares.

Anyone can buy shares in a public limited company ('Plc'), and these shares can be bought and sold on the open market. The shares in a private limited company (whose name will end in 'Ltd' or 'Limited') cannot be openly bought and sold.

A company may pay dividends on its shares if it has enough profit. The shareholders receive dividends based on how many shares they own.

Example of a shareholder:

A company with two shareholders, one who owns 75 shares and the other 25 shares, pays out a dividend of £1,000. The first shareholder will receive £750, the second £250.

Frequently Asked Questions

Is a shareholder the same as a director?

No, though they may be the same individuals, particularly in a small or close company. Shareholders own the company, while directors have the legal responsibility for running it.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

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