Question

Q1: What is the difference between common stock and preferred stock?

Q2: How is corporate income double-taxed?

Answer 1

1. Common stock:

Common stock which is also recognized by other terms such as ordinary share, common share or voting share is a type of security that represents ownership of equity in a company.

Owners of the common share have the right to participate in electing the board of directors and are able to vote in other important corporate policies and they can also claim a share in companys profit.

Preferred stock :

Preferred stocks are a special class of shares which gives the holder a fixed dividend , the preferred shares usually donot have any voting rights and preferred stock dividends are usually higher than the common stock dividend.

2. Double taxation is a term which is used to refer to the taxes that are paid twice on the same income when taxes are taken on both personal and corporate levels. The corporation is taxed on its earnings and the shareholders are taxed again on th3 dividends they recieve from those earnings. Another example of corporate double taxation are shareholders who are also employees and ownersof the corporation.