Common stock, also known as ordinary shares, is a type of stock that represents a portion of a company's ownership. This stock class entitles investors to profits, which are typically distributed in the form of dividends. A company's board of directors is elected by its common stockholders, who also vote on corporate policies. Holders of this stock class have rights to a company's assets in the event of a liquidation, but only after preferred stockholders and other debt holders have been paid. Common stock is typically distributed to company founders and employees. Preferred stock, or preference shares, on the other hand, entitles the holder to regular dividend payments before common shareholders. As previously stated, preferred shareholders are also paid first if the company dissolves or declares bankruptcy. Preferred stock has no voting rights and is ideal for investors looking for consistent passive income. 1 Many businesses issue both common and preferred stock. Alphabet Inc., for example, lists Alphabet Inc. (GOOGL), its Class A common stock, and Alphabet Inc. (GOOG), its preferred Class C stock.