Difference between common stock and prefered stock?

Answer 1

Common stockholders generally are the only shareholders who are allowed to vote at shareholders' meetings, whereas preferred stockholders' shares generally convey no voting rights.

However, preferred stockholders have guaranteed dividend rights that common shareholders do not have. Common stockholders have no right to any dividends at all, unless and until the Board of Directors, at its sole discretion, declares a dividend on common stock. However, even if a common stock dividend is declared, it cannot be paid until the preferred stockholders get the dividends that they are due on their preferred shares - hence the name "preferred" stock.

Answer 2

Preferred stock has an advantage when a company pays a dividend or is forced to liquidate. Preferred stock means that they are from a preferential class and are often categorized as "Class A or Class B."

I've attached a link for further information about stock classes.

Answer 3

There are significant differences between common and preferred stock. Generally, you will want to issue common stock to founders and employees through the employee stock option program and offer preferred stock to investors. Common stock should be thought of as a vehicle for issuance in exchange for effort, or "sweat equity." Preferred stock has preferential rights in matters such as liquidation and board representation. These are rights generally reserved for those who have invested cash in the business. Having common and preferred stock is the simplest way to give preferred investors the protections they'll insist on. You may need to provide these investors the right to co-invest in additional rounds of financing and the right to a co-sale if a shareholder sells their ownership in the business. It's not uncommon for the value of preferred-stock shares to be 10 times that of common-stock shares, although ultimately, both types of stock are converted into common shares at the time of the public offering.