# Preferred stock vs common stock

Concept · [Fundraising and equity](https://ecosystem.samcarlton.com/fundraising)

Also called: preferred stock, common stock, preferred shares, common shares, preferred, common, share class, classes of stock

The two main kinds of [shares](https://ecosystem.samcarlton.com/equity) in a startup. [Founders](https://ecosystem.samcarlton.com/founder) and [employees](https://ecosystem.samcarlton.com/contractor-vs-employee) usually hold common stock. Investors in a [priced round](https://ecosystem.samcarlton.com/priced-round) usually receive preferred stock, which carries extra rights such as a [liquidation preference](https://ecosystem.samcarlton.com/liquidation-preference).

**For example:** A [founder](https://ecosystem.samcarlton.com/founder) holds 4 million [shares](https://ecosystem.samcarlton.com/equity) of common stock. A fund buys 1 million shares of preferred stock in the [Series A](https://ecosystem.samcarlton.com/series-a). Both own part of the company, with different rights.

## Connects to (4)

- [Equity](https://ecosystem.samcarlton.com/equity): Ownership in a company.
- [Liquidation preference](https://ecosystem.samcarlton.com/liquidation-preference): A term that sets who gets paid first, and how much, when a company is sold or shut down.
- [Priced round](https://ecosystem.samcarlton.com/priced-round): A fundraising round where investors buy shares at a set price per share, which fixes the valuation of the company.
- [409A valuation](https://ecosystem.samcarlton.com/409a-valuation): An independent appraisal of what one share of a private company's common stock is worth.

> This glossary is plain-language orientation, not legal or financial advice. Before you decide on a company structure, a contract, taxes or a fundraising deal, talk with a lawyer or an accountant.

Map view: https://ecosystem.samcarlton.com/preferred-stock