What is the principle behind having shareholders for a company? How do they help the company?

Answer 1

Share holders are the real owners of any company, they provide the money to start the company. Since one person or entity cannot provide the whole money, the total capital of the company is divided into smaller units called share.

For any decision of the company the shareholders approval is mandatory.

Answer 2

Simply put Shareholders are owners and without them a Company cannot be created be it listed or otherwise.

There are two kind of shareholders (owners) active and passive. Active shareholders invest money as well as manage the business, usally promoters or key executives. Passive shareholders invest money and get returns in the form of divident and they dont manage business like those who invest in IPO or through stock markets.

To start and run a business it requires money which can be in the form of capital (invested by shareholders) or loans (provided by Banks etc). Shareholders get profit, if there is any and Banks get interest if there is profit or not. Hence shareholders take greater risk compared Banks.

Since bank will not provide loans to company which cannot make profit in the initial period, it is shareholders who invest money and reap greater returns in future.

To summarise shareholders
a) invest money
b) take high risk &
c) manage & run the business

Answer 3

a company is a body prmoted with the object of undertaking a business. This business will get funded by equity and debt [borrowing]. The promoters of the compnay apart from other investors contribute to the equity. They are share holders since their investment is divided into number of shares as signifying ownership of the company. normally equity share holders are the last ones to paid off if the company is wound up. Normally share holders are paid dividend from the profits that a company earns. SH can be board members who can contribute to business strategy and give valuable advice in runnig the business and manging the assets of the company. they appoint a team that infact would run the business.

Answer 4

Shareholders are investors. They invest ,money in a co to help get it started.

Now, no one invests in co's like GE or IBM these days tp help get it started, they do because they believe it is a good place to invest their monney for maximum returns or current income. However, at onethe GE did not exist or was just a tiny company and it needed money to grow. Investors put up their money to help it get started in the hopes their investment would grow in value.
There are many investors who put their money into companies which went out of business and they lost every cent they invested. (Enron)
That;'s the risk you take.

Answer 5

The ONLY reason a company issues shares of stock is to raise money. And, issuing stock is about the least risky and inexpensive way for companies to raise LOTS of money.

Answer 6

It is just another way to borrow other peoples money. Before making an IPO, it is smart to compare that to other forms of borrowing money, such as bank loans and prvate investor groups.