If you buy 50 percent of a stock do you own that company?

Written by john lister Google
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If you buy 50 percent of a stock do you own that company?
Stocks are about control as well as ownership (Comstock/Comstock/Getty Images)

Once a company is formed, it becomes an entity in its own right and is separate from the people running the business. Whether or not the company is publicly traded, shareholders each own a portion of the company. Owning 50 percent of the stock will not mean you own it outright, but could mean you have an important degree of control.

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The percentage of a company's stock that you own becomes important in voting issues. If you either own a majority of the stock, or can influence enough other shareholders to get a majority, you can decide key issues about the way the company operates. However, most companies have rules limiting the decisions that can be reached through shareholder votes. A key principle is the requirement that major decisions must follow the need to maximise shareholder value. For example, if you run a haulage company and bought up a majority of shares in a supermarket chain, you likely couldn't bring a vote to have the supermarket use your delivery trucks and over pay.

50-50 split

In many businesses that aren't publicly traded, the shares are initially divided in a way that avoids an exact 50-50 split. In publicly traded firms, the sheer number of shares often makes it unlikely somebody would own exactly 50 percent. Usually you would have to own 51 percent of a company's stock to be considered the majority shareholder. The rules for dealing with a 50-50 split in a vote are set down in the company's legal documents such as the articles of association. One system is that a split should be decided by a vote of the directors, with the chairman casting the deciding vote if needed.

Preferred stock

Some companies that issue shares allow investors to buy a special type of stock called preferred stock. This usually differs from ordinary stock because it guarantees a dividend payment each year rather than the payment being at the company's discretion. Holders of preferred stock get priority over holders of common stock if the company goes into liquidation. However, as the price for these benefits, preferred stock usually doesn't carry voting rights. This means that if some or all of your stock is preferred stock, you could own half of the total number of shares in the company but not control it.

Stock classes

Some companies issue two different types of stock, often known as Class A and Class B. The different stock will bring different voting rights. For example, you might get 10 votes for every Class A share and 1 vote for every Class B share. This is most commonly used when a person, family or group of co-founders want to raise money by taking a company public, and keep the option open of issuing more stock in the future, but want to make sure they can keep control of the company. The owners would therefore issue themselves with Class A stock and then sell Class B stock to the public. With such a set-up you could therefore buy 50 percent of all the shares in the company but not have control.

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