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What are equity securities?

The concept of equitable securities describes a share of common stock in a corporation. This financial instrument gives individuals an ownership stake over an Ohio business when they invest in it. The amount of controlling interest that you have over the company depends on the percentage of the total number of shares you receive.

Mutual funds are also a type of equity security provided that those exchange-traded funds are composed of pooled shares.

Equity securities allow a company to generate revenue by diversifying ownership in the business among a pool of investors. Company stakeholders can then use the collected or pooled funds to secure business contracts and leases.

Stakeholders can't always make unilateral decisions as to what's right for their business. Whether they can or not is contingent upon the amount of interest that each shareholder has given up. Some of them may have to consult other investors before making critical decisions.

A board of trustees exists to act as a proxy on behalf of the stakeholders. They're responsible for ensuring that any decisions that a company's leadership makes are in its best interests. That is why some companies may offer both preferred and common stocks.

Companies that offer common stocks give their investors or stakeholders voting rights. Preferred shareholders generally don't have voting rights, but they do receive preferential payment options.

If you are considering having equity securities or stocks for your business, then it's vital to understand the difference between these different stakeholder tools. You may lose the ability to make decisions for your Ohio company if you're not careful in selecting securities arrangements to put in place. A business contracts and leases attorney can explain the differences between the two and help you decide which option may be best for your Cincinnati company.

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