What is Preferred Stock? Definition, requirements, and how it applies to your business formation. Learn everything about preferred stock for LLCs and corporations.
# Preferred Stock
Preferred stock is a class of equity that has priority over common stock in dividend payments and asset distribution upon liquidation. In startup context, preferred stock is what investors receive in exchange for their investment — it typically includes a liquidation preference, anti-dilution protection, and various governance rights not available to common stockholders.
Each funding round creates a new series of preferred stock (Series A, Series B, etc.) with its own terms. The liquidation preference means investors get their money back before common stockholders receive anything in an exit event.
Lovie's cap table management tracks all preferred stock series, their conversion ratios, and liquidation preferences to give founders a clear picture of their ownership economics.