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I'm about to receive equity in a company. Let's say I get 10% ownership. Does that mean that if the company makes $100 in profit every month, they have to give me $10?

  • If you own a fraction of the company, you already own a fraction of the profits. – DJohnM Nov 29 '16 at 22:18
  • Is it organized as an MLP or REIT in the United States? – user662852 Nov 29 '16 at 23:01
  • They don't have to give you nothing unless your investment contract stated such a clause. If there existed such an automation then I would imagine you are going to get thoroughly screwed by "Shareholder must pay 10% of company losses." – MonkeyZeus Dec 2 '16 at 21:57
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No. Some profits could (and should) go to retained earnings.

You will only received income when it is distributed to shareholders. It happens when the owners decide it should happen.

Keep in mind that in the case you cite, $100 profit is made and held as retained earnings, the company's value increases by that $100. Your net worth would increase by $10 as you own a more valuable company.

With privately held companies things can be a bit dicey depending upon the ownership.

  • At what point does that happen? – Edmund Nov 29 '16 at 20:51
  • @Edmund: Maybe never. Essentially, your equity position (assuming it carries voting rights) entitles you to an indirect influence (via election of board members) in matters such as how and whether profits are distributed to shareholders. It doesn't directly entitle you to a share of profit. – BrenBarn Nov 30 '16 at 4:12

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