What is Common Stock?
Common Stock
Common Stock is the primary class of equity ownership in a startup, typically held by founders, employees, and advisors.
Detailed Deep Dive
Common Stock represents the base equity class of a startup. Held by founders and employees, common stock value depends on achieving an exit value that exceeds the preferred stock liquidation backlog.
Frequently Asked Questions
Q:Does common stock have liquidation preference?
No. In an exit, common stock is only paid out after all preferred stock liquidation preferences have been fully satisfied.
Q:How is common stock valued?
Its value is set through independent appraisals (409A valuations) for tax compliance purposes.
Quick Facts
- CategoryLegal
- Key ApplicationEmployee stock option pools and founder allocations
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