ContractsCounsel Logo
Home Blog Common Stock

Jump to Section

ContractsCounsel has assisted 46 clients with stock purchase agreements and maintains a network of 62 securities lawyers available daily.

What is Common Stock?

Common stock is the standard form of shares issued by a company to provide a shareholder with rights and a share of ownership within a corporation. Individuals who hold common stock within a company are eligible to vote on policies as well as the board of directors within the company.

Over the long term, this type of stock can provide high rates of return for investors however it is not without risks associated with liquidation of the company, or other loss of value after the investment is made.

Here is an article about what common stock is.

Difference Between Common Stock and Preferred Stock

There are two different types of stock that may be issued by a company. These include common stock and preferred stock. Where common stock is the most prevalent, preferred stock can afford the greatest level of security for investors. In fact, there are a number of differences between the two.

  • Difference 1. common stock is the standard form of shares for a company
  • Difference 2. common stock affords voting rights to investors
  • Difference 3. Preferred stock earns first dividends during times of high profits
  • Difference 4. preferred stock earns first payouts when companies are liquidated
  • Difference 5. preferred stock is less likely to appreciate in value
  • Difference 6. preferred stock represents a safer investment
  • Difference 7. preferred stock may be callable by the issuer

Here is an article about the difference between common stock and preferred stock.

Types of Common Stock

When we talk about stock often the discussion is about common or preferred stock. However, there are classifications within these types of stock. Specifically, there are several types of common stock to be considered. These include:

  • Growth stocks
  • Value stocks
  • Small-cap stocks
  • Large-cap stocks

Growth Stocks

These stocks are those within a company that is expected to grow at a much higher rate than the average. Growth stocks typically do not offer dividends but do offer a higher potential return through capital gains when they are sold. Instead of dividends, the company reinvests all profits back into the company, which allows for increased growth.

These types of stocks will often appear to be more expensive, however the idea is to be able to get in ‘on the ground floor’ of the investment and to realize a much greater return later. However, these stocks can also represent a significant amount of risk and a loss if the company does not grow as anticipated.

Value Stocks

Value stocks are those that appear to be exactly that, a value. They appear to be trading at a much lower cost than should be seen based on fundamentals that might include earnings, sales, and dividends. They often appear to be a very good investment.

These stocks are generally lower because the company is not seen as being a favorable option. The stocks, as a result, have a higher dividend yield as well as a low P/E and P/B ratio. These can be considered risky because of the potential for the market to continue to view them unfavorably but can also have a higher return.

Small-Cap Stocks

Small-cap stocks are those that are issued by a company that is public but has a low market value of approximately $300 million to $2 billion. These stocks are typically for younger companies, which can make them appealing to investors.

Investors who want to jump into an investment with a company that could have great growth potential may choose small-cap stocks. These companies offer good potential for investment and could be great growth opportunities with a high yield.

Companies that are considered small-cap can be a higher risk as well because there is more potential for volatility. With a smaller size there is more chance that volatility will be too much for the company as well.

Large-Cap Stocks

Large-cap stocks are those that have a high market capitalization. They are upwards of $10 billion generally (though these numbers can vary). They also tend to have less growth potential. At least, there is less aggressive growth potential, but higher levels of stability and even the potential for higher dividends than other stocks.

Investors who are looking for less volatility and risk may choose to enter into large-cap stocks. They may be greatly impacted by the economic climate of the time, which could lead to large losses but less potential for large gains.

Here is an article about different types of common stock.

Meet some lawyers on our platform

Brian S.

15 projects on CC
CC verified
View Profile

Zachary J.

383 projects on CC
CC verified
View Profile

Linda W.

12 projects on CC
CC verified
View Profile

Daniel R.

148 projects on CC
CC verified
View Profile

Shareholders and Common Stock

When you talk about stock and shareholders you’re generally talking about common stock. This is the type of stock that most people purchase when they choose to invest in a company. It allows them to gain a level of ownership within the company.

Shareholders, in general, are individuals or companies that own at least one ‘share’ or piece of stock for a company. These shareholders may also purchase many stocks or shares and through this can gain a larger ownership share within the company.

The more shares the larger the ownership stake and the more say and control that shareholder has over decisions that are made by the company. Even a single share can provide a shareholder with the right to vote for corporate issues and the board of directors as well as earning dividends.

Here is an article about shareholders and common stock.

What is a Common Stock Purchase?

A common stock purchase occurs when an individual chooses to purchase one or more shares within a company. This can be done through a broker or directly from the company.

Purchasing stock through a broker can be a relatively simple process:

  1. Choose your broker. Consider things like their reputation, how you can get in touch with them, how much the fees are, and the types of stocks available.
  2. Open your account. Once you’ve chosen a broker, you’re ready to open a account with them, which just means filling out the paperwork and an application.
  3. Place your order. Once you’ve got your account you can place an order for the specific stocks that you want. You can choose the name of the company you want to buy from or you can scan through available stocks.

The other option is to purchase from the company.

  1. Navigate to the investor relations page for the specific company you would like to invest in. They should have information about how to invest and how to purchase stocks. This usually involves signing up through a website and then making a direct order.
  2. Create your account. You’ll need to create an account in order to make a purchase but the website should walk you through the entire process.
  3. Place your order. You’re ready to place an order as soon as you’ve created your account. You can select the number of shares you want and then submit the order the way you want.

Here is an article about common stock purchases.

Terms in a Common Stock Purchase Agreement

A stock purchase agreement for common stock has several terms but commonly includes:

  • Date of transaction
  • Number of stock certificates
  • Name of corporation issuing stock
  • Purchase and sale endorsements
  • Price per share
  • Representations/warranties of the seller
  • Representation and warranties of purchaser
  • Agreement clause
  • Statement of government compliance
  • Witnesses
  • Amount and payment of purchase price

Here is an article about the different terms in a common stock purchase agreement.

Taxes and Common Stock

Common stock comes with a range of different tax obligations, which include:

Gains

Stocks that are sold for higher than what is paid for them are considered a capital gain and you’ll be required to pay capital gains taxes on your tax return. This only occurs if you actually sell the share and receive those gains.

Long-term/short-term

Stocks that you hold for a long period of time will have a different tax base than those you only hold for a short-term. If you own shares for one year or less you will owe short-term capital gains, which will be a different tax rate (much higher) than those you earn on shares you’ve held longer than a year.

Post a project on ContractsCounsel’s marketplace to get flat fee quotes from lawyers to draft and review contracts. All lawyers are vetted by our team and peer-reviewed by our customers for you to explore before hiring.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


Need help with a Stock Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,328 reviews

Meet some of our Lawyers

David L. on ContractsCounsel
View David
5.0 (2)
Member Since:
July 11, 2023
Benjamin W. on ContractsCounsel
View Benjamin
5.0 (32)
Member Since:
March 11, 2021

Benjamin W.

Founder
Free Consultation
Los Angeles, CA
9 Yrs Experience
Licensed in CA
UCLA School of Law

I am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!

Darryl S. on ContractsCounsel
View Darryl
5.0 (33)
Member Since:
November 9, 2023

Darryl S.

Founder and Counselor-at-Law
Free Consultation
TEXAS
31 Yrs Experience
Licensed in TX
The University of Texas School of Law Austin

I offer flat/fixed fees rather than hourly work to help lower your legal costs and align our interests. I specialize in contract law and focus on making sure your contract is clear, protects your interests and meets your needs. You can expect fast, straightforward communication from me, making sure you understand every step. With my experience, you'll get a detailed review of your contract at a fair, fixed price, without any surprises. I have over 30 years of business and legal experience that I bring to your project. I graduated from The University of Texas School of Law with High Honors in 1993 and practiced at Texas' largest law firm. I have founded companies and so understand how to be helpful as both a lawyer and business owner.

Nicole C. on ContractsCounsel
View Nicole
5.0 (2)
Member Since:
December 21, 2023

Nicole C.

Business Lawyer
Free Consultation
Dix Hills, New York
23 Yrs Experience
Licensed in NY
Columbia Law School

Nicole expertly and creatively works with businesses and individuals in all types of employment and business relations issues. She investigates workplace disputes as a neutral third party, drafts/reviews severance and hiring agreements, advises on day-to-day workplace issues, and reviews all kinds of business contracts. Nicole represents individuals, small businesses, non-profit organizations, labor unions, and benefits funds in various industries including public sector, entertainment, health care, education, transportation, construction, and communications. She has represented clients in federal and New York State courts, administrative proceedings, and arbitration hearings. Nicole is admitted to practice in New York.

J.R. S. on ContractsCounsel
View J.R.
5.0 (4)
Member Since:
December 29, 2023

J.R. S.

Business Lawyer
Free Consultation
Flower Mound, Texas
5 Yrs Experience
Licensed in TX
Touro Law, New York

Experienced Attorney with an MBA in Finance who provides a business-oriented mindset and thrives in a collaborative environment with a-typical challenges. Possesses exceptional skills in legal research, drafting and enforcing contracts, skillful in negotiations and mediations, drafts extremely persuasive pleadings, attacks depositions with zeal for my clients. Experience includes Business Management and IT Consulting with a successful track record managing outside relationships, associated costs, and optimizing outcomes for client(s). Effectively restructures antiquated business processes and incorporates technology and best practices to effectuate progressive outcomes for business clients. Partners collaboratively with business leaders to advance company objectives while minimizing risk to ensure internal and external compliance, increased profitability, and diverse practices. Dynamic communicator with the interpersonal skills to build trusting relationships with executives, management, and employees of various backgrounds, expertise, and styles.

Karen C. on ContractsCounsel
View Karen
Member Since:
December 28, 2023

Karen C.

attorney and client relations
Free Consultation
Denver, CO
26 Yrs Experience
Licensed in MI
Chicago-Kent College of Law

I have approximately 15 years of attorney practice in IL and MI, doing both transactional and litigation work. I am currently licensed in MI and will be taking the CO bar in February. I am open to discussing paralegal or law clerk positions as I've not practiced law full-time since 2015. I worked as a residential realtor from 2015 until I moved to CO in 2021. I took the UBE in July 2023. I am qualified to become licensed in Utah, New Mexico, Oklahoma and Indiana. I missed the mark for CO by 5 points. I should be licensed to practice law in CO by April 2024.

Find the best lawyer for your project

Browse Lawyers Now

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Need help with a Stock Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,328 reviews
CONTRACT LAWYERS BY TOP CITIES
See All Securities Lawyers

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

View Trustpilot Review

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

View Trustpilot Review

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

View Trustpilot Review

Need help with a Stock Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,328 reviews

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city