What is the difference between paying back shareholders a dollar amount each year vs paying them a dividend? Is it the same thing?

  • Need more information to answer, including: (1) "Same thing" for what? Tax? Accounting? General financial theory? Corporate law? and (2) What jurisdiction are you talking about? Law will change depending on where you are. The short answer is no, these things are very different. – Grade 'Eh' Bacon Jan 8 '18 at 18:20
  • Also - "paying back original dollar contribution" - are you referring to paying back a loan, or paying back an equity contribution [ie shares]? The two types of contributions are treated differently. – Grade 'Eh' Bacon Jan 8 '18 at 18:21
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    That sounds like the definition of a dividend, so if you mean something different then please elaborate. – D Stanley Jan 8 '18 at 18:34
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    The word "back" is important here, I think. Dividend would not normally imply "back", as in paying something owed/loaned: it's just a payment. – Joe Jan 8 '18 at 19:41

If you keep your shares and the company pays shareholders a certain amount per share, that's probably a dividend (see comments). In the US you'll receive a 1099-DIV for tax purposes.

In some cases, like a privately held company in which you hold shares, you could receive Capital Distributions instead of dividends and will get a Schedule K-1 for tax purposes.

If you have shares and someone pays you for them and you don't keep your shares after the transaction is over, it's a stock sale. There's a 1099 for that, too.

If you never had any shares to begin with and you gave a company money and they pay you back with interest, it's a loan. You should receive a 1099-INT.

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    Using the word "dividend" to broadly describe any cash per share periodically issued to shareholders oversimplifies matters. There are a variety of reasons that cash per share could be issued to shareholders. A distribution might be return of capital, for instance, which has a distinctly different treatment than a dividend, for tax purposes. – Chris W. Rea Jan 8 '18 at 19:18
  • I'll edit and qualify my response. Capital Distributions are indeed an alternative explanation. – Rocky Jan 8 '18 at 20:46

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