Private Stock
Privately owned companies are just that, private. The owners can do as they please. If two people invest equally in a business, then they most likely agree to own equal "shares" of the company. In this situation, they probably receive equal returns from revenue. The owners and investors are allowed to come up with their own agreements regarding investments and returns.
S corporations do not have to be publicly traded companies, but can elect to do so to raise additional capital. If stock is sold public, then the company must have a board of directors. The investors, or stockholders, must be able to participate in the election of these people. In addition stockholders may review the records and, depending on the agreement, may have the ability to vote on business decisions like selling assets.
Public Stock
Public stock is traded on the open market (the New York Stock Exchange is the most common in the US). Many companies choose to go public to raise additional capital. All C corporations must be traded publicly, even though 100% of the stocks can be owned by one person. Each quarter the company's worth is totaled, not including debt, and published as its market value. Stock prices are figured based on the market value and number of shares. The board of directors then decides how much of the profits to share, in the form of dividends, with the investors.
An Initial Public Offering (IPO) happens when a corporation wants to sell shares to the public. The corporation must hire an investment banking company, or underwriter, which decides how many shares and at what values those shares will be sold. The corporation issuing the stock signs it over to the underwriter. After gathering a group of interested buyers, the underwriter/bank offers the shares to the public.
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