Definition of common stock

Definition

Two important classes of stock are common stock and preferred stock. In general, preferred stock has “rights, preferences, privileges, and restrictions” that common stock does not have. Typically, investors get preferred stock, and founders and employees get common stock (or stock options).

Related terms

More from The Holloway Guide to Equity Compensation

Startups and Growth › Classes of stock

The exact number of classes of stock and the differences between them can vary company to company, and, in a startup, these can vary at each round of funding.

confusion Another term you’re likely to hear is founders’ stock, which is (usually) common stock allocated at a company’s formation, but otherwise doesn’t have any different rights from other common stock.

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The Holloway Guide to Equity Compensation
Joshua Levy, Joe Wallin, and over 35 contributors
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Stock options, RSUs, job offers, and taxes—a detailed reference, including hundreds of resources, explained from the ground up and made to be improved over time.