What's the difference between a mutual company and stock company?

Question

What's the difference between a mutual company and stock company?

Answer 1

A mutual company is a company with a specific objective owned by shareholders that receive dividends and capital gains according to predetermined formulae. A stock company is also owned by shareholders, but the stock company has a specific mission statement that is what activity the company intends to engage in to create profit for its shareholders. The stock company is under no obligation to return dividends to shareholders and shareholders will only receive capital gains if the sale of the shareholders ownership has greater value than the purchase price. Management's objective in a stock company is to provide shareholder value through appreciation of the shares of stock.    The mutaul company's shares can also appreciate in value if the underlying investments increase in value resulting in higher portfolio worth and thus higher net asset value per share.

Answer 2

A stock company is owned by the stockholders.  A mutual company is owned by the policyholders.

Answer 3

Simple answer: A mutual company is owned by the policy holders. A stock company is owned by shareholders.

Answer 4

A mutual company can have divisible surplus.

A stock company can have profits.

Imagine a group of people who form a group to wash cars.  At the end of each day they pay their expenses and have money left over.  That money is mutually owned by the members.  They divide that surplus of funds based upon a formula determined in advance.  

The division of extra cash is called a divisible surplus.

Imagine another group of people.  They put up their own money to form a corporation that washes cars.  At the end of each day the company pays their expenses and has money left over, we hope.  

That extra money is called a profit.  

Mutual vs. Stock.

Easy?