Who are typically the last to be paid in a business?

In a business, shareholders, particularly common shareholders, are typically the last to be paid in the event of a liquidation or bankruptcy. The order of payment during financial distress is clearly defined: creditors and employees usually have precedence, as they are owed for debts and labor before any distributions are made to those who hold shares in the company.

Creditors, including bondholders and suppliers, are legally entitled to be paid first, followed by employees who are owed wages or benefits. Management usually receive their salaries in the normal course of business, but they typically do not have interests that take precedence over creditor claims.

Shareholders only receive payouts after all other obligations have been settled, and in the case of common shareholders, they are at the back of the line when it comes to the distribution of a company’s remaining assets. This highlights their higher risk profile compared to creditors and employees, as shareholders depend on the company’s profitability and performance while facing potential total loss in adverse situations.