What term is commonly used for companies that distribute profits to their shareholders?

The term that is commonly used for companies that distribute profits to their shareholders is referred to as stock companies. Stock companies, unlike mutual companies, are owned by shareholders who invest capital into the company. These shareholders are entitled to receive dividends, which are a portion of the company’s profits paid out to them, proportional to their ownership stake. This profit distribution incentivizes investment and aligns the interests of the shareholders with the financial performance of the company.

In contrast, non-profit organizations do not distribute profits to shareholders; instead, any surplus funds are reinvested back into the organization’s mission or programs. Fraternal societies operate as nonprofit organizations focused on providing mutual aid and support among their members and do not engage in profit distribution like stock companies do. Mutual companies are owned by their policyholders, and instead of shareholders, they distribute profits in the form of dividends to policyholders rather than through stock dividends, further distinguishing them from stock companies.