Men and women are almost identical in many of their credit habits

Fact checked by Amanda Jackson
Reviewed by Katie Miller

You likely know what your own credit score is, but you probably don’t know how it compares to others’ credit scores, especially when it comes to gender differences. Is there a gap, like the gender wage gap, between women’s and men’s credit scores?

Legally, there shouldn’t be, thanks to the Equal Credit Opportunity Act (ECOA) of 1974, which bars lenders from discriminating against groups based on factors such as race, color, nationality, religion, sex, age, and receipt of public assistance. The ECOA largely prohibits the use of demographic information, including gender, in credit underwriting, pricing, reporting, and scoring. That makes gathering data on gender differences in credit difficult.

However, Experian, one of the three major credit reporting agencies, looked into this topic in “Women and Credit 2020: How History Shaped Today’s Credit Landscape,” a report that examined credit scores and usage by gender. It remains the most recent detailed source available on the subject. Here is some historical background to help provide context for the numbers.

Key Takeaways

• Women faced many hurdles in accessing credit as late as the early 1970s, requiring male cosigners and large down payments to get loans.
• The Equal Credit Opportunity Act of 1974 prohibited several practices that restricted women’s access to credit and their ability to be financially self-reliant.
• The average credit score of the two genders was nearly identical in 2020.
• Men and women carried essentially the same level of credit card debt.
• Men carried more debt than women overall, including in every category except student loans.

The Equal Credit Opportunity Act of 1974

It’s hard to believe that women weren’t allowed to take out a loan or apply for credit without a male cosigner as recently as the 1970s. What’s more, when buying a home they were typically required to make a larger down payment than male applicants with a similar credit history.

But, that hasn’t changed. Women continue to face challenges when it comes to mortgage approvals. There are many contributing factors, including the gender-based wage gap, according to the National Association of Realtors. In 2023, on average, women earned 83.6 cents for each dollar earned by men. That translates to median full-time weekly earnings of $1,005 for women compared to a median full-time weekly wage of $1,202 for men for 2023.

The ECOA was a major milestone in trying to end gender discrimination as it relates to accessing credit. The Experian report showed that credit availability and usage for women and men became largely aligned as of 2020. The table below delineates the divergence in scores and the average debt balance according to type for men and women.

Source: Women and Credit 2020: How History Shaped Today’s Credit Landscape

This isn’t to say there were no differences in how men and women applied for and used debt and credit. Men carried more overall debt than women, including across most debt categories. On the other hand, women carried more student loan debt and often had more credit cards.

704 and 715

The average credit score for women as of the fourth quarter of 2019 and the average consumer credit score in the U.S. for 2024.

Credit and Debt for Women vs. Men

Any parity that exists between men’s and women’s average credit scores is not entirely new. The numbers were similarly close in the mid-2010s, and both averages rose 10 points from the second quarter of 2015 up through the last quarter of 2019. In modern-day credit scoring models, however, there is no consideration of gender factors, thanks to the ECOA.

There were some differences in the Experian report in how men and women accumulated their ongoing debt. Men had about 9% more debt on average than women: approximately $338,000 compared to $310,000 in total debt balances. This difference came from holding more debt than women in every debt category but one. Men held 9.7% more mortgage and home equity line of credit (HELOC) debt, 16.3% more auto loan debt, and, most strikingly, 20% more personal loan debt.

Women held slightly more student loan debt on average (2.7%) than men, and they also tended to have more credit cards, averaging 4.5 cards as opposed to 3.6 cards for men. When it came to credit card balances, the difference was just $125 between the genders (about 2%), which is not considered statistically significant.

Are the Average Credit Scores for Men and Women Different?

Not materially. As of 2020 women had an average credit score of 704, while the average score for men was 705.

What Is the Equal Credit Opportunity Act?

Passed by Congress in 1974 and signed into law by President Gerald R. Ford, the ECOA did its best to level the playing field when it comes to women’s access to credit. Prior to the law, women weren’t allowed to take out a loan or apply for credit without a male cosigner. Women were also typically required to have a larger down payment when buying a home than men were.

What Is the Gender Wage Gap?

Women still earn less than men for comparable work, something known as the gender wage gap. In 2023, women earned 83.6 cents for each dollar earned by men.

The Bottom Line

Legislative changes in 1974 allowed for greater access to credit by American women, enabling them to take out loans and credit cards without relying on male cosigners or being unfairly penalized when taking out a home loan. As of 2020 women had largely climbed to credit and debt equity, achieving average credit scores that were identical to men’s.

The makeup of debt did differ between genders, with men taking on more debt for housing, cars, and other items, while women as a group took on slightly more student loan debt. Although the total average debt balance of men was about 10% higher than women’s, the identical average credit scores implied that there was a similarly responsible approach to the handling of credit across genders.

Fact checked by Ryan Eichler
Reviewed by Anthony Battle

Over the last several decades, automated teller machines (ATMs) have become commonplace, from bank lobbies to shopping centers to gas stations. As of 2025, there are more than 3.5 million ATMs around the world. As a result of their ubiquity, people casually use these virtual cash dispensers without a second thought. The notion that something could go wrong never crosses their minds.

Unfortunately, things are not always as they seem at the ATM. Most ATM scams involve criminal theft of debit card numbers and personal identification numbers (PINs) from innocent users of these machines. There are several variations of this confidence scheme, but all involve the unknowing cooperation of the cardholders themselves. Let’s explore some common ways people get ripped off at ATMs. 

Key Takeaways

• ATM scams can involve stealing your debit card number or personal identification number.  
• Popular scams that thieves use include using a counterfeit device for access to the door to the ATM and using a false façade on the front of the machine. 
• Some criminals can swipe data from free-standing ATMs using cracking programs. 
• Other forms of ATM scams include good old-fashioned stealing the entire ATM, or placing a fake deposit receptacle at the ATM, and putting an “out of order” sign on the machine. 

1. Every Little Thing It Does Is Magic

One common scheme begins when a bank customer swipes their debit card in the device that opens the door to the ATM vestibule typically found in a bank’s inner doorway. Because most people are unaware of precisely what this magnetic reader should look like, criminals can place a counterfeit device that reads and copies card numbers on the outside door without being detected by customers.

Once the customer is inside, a hidden surveillance camera records PINs as customers enter them on the ATM keyboard. The result of this information gathering is the illegal creation of a duplicate card that thieves quickly use to withdraw all the funds in the connected bank accounts as quickly as possible.

Detection of this particular fraud is difficult for the average consumer as there are several dozen manufacturers of legitimate swiping devices. Attempting to distinguish a real one from a fake is almost impossible.

Tips to Prevent/Avoid This Scam

To avoid this scam, you should adopt vigilant practices whenever you use an ATM. This includes visually inspecting the ATM for any abnormalities, covering the keypad while entering the PIN, and using ATMs in well-lit and secure locations. You should regularly monitor your bank statements for unauthorized transactions and enable transaction alert notifications so you can be alerted to detect suspicious activity when it happens. You can also choose ATMs affiliated with reputable banks that may monitor their own ATMs and use contactless payment methods when possible.

2. Don’t Stand So Close to Me

Another method of trickery involves the attachment of a false façade over the ATM machine. Though the machine looks normal, in reality, the attachment will “eat” your card and display an error message. Your PIN is usually recorded by a hidden camera, or in some cases, by a “helpful” person standing nearby who suggests that you try to enter your PIN again. Of course, this person is actually a criminal, and moments after you leave, they will retrieve your card from the false front of the ATM and walk away with both your card and the access code.

Other times, an overlay will “skim” the card without destroying it, collecting its information along with the pin code and other data you may enter. For the user, it appears to be a normal transaction, but the thieves now have your card number. In 2021, for instance, the FBI identified an ATM skimming fraud of almost $600,000 throughout the Midwest.

Tips to Avoid/Prevent This Scam

To prevent falling victim to this cam, carefully inspect the ATM for any irregularities, loose parts, or unusual attachments before inserting your card. If the machine or surrounding area looks suspicious or displays an error message after inserting the card, do not re-enter your PIN and report it to the bank immediately. You should also be wary of any person nearby offering help as they may be accomplices to the scam.

Important

There is government legislation that protects ATM users. For example, The Department of Financial Services in New York State has established the ATM Safety Act which applies to all Federal and State chartered banking institutions that operate ATM facilities in the state. The Act requires certain ATM facilities to meet standards to ensure they are safe to use.

3. Ghosts in the Machines

Freestanding ATMs are also subject to criminal activity. These devices are located in areas as varied as airport terminals and self-service gasoline pumps. In some situations, criminal hackers are able to capture account information by using WiFi scanners and cracking programs to download transaction data when the systems fail to be protected by high-level encryption software. 

The most audacious of ATM scams is the installation of machines whose only purpose is to steal information. This criminal confidence scheme was once a popular activity of organized crime circles. Seemingly normal ATMs would be placed in small shops, bars, and other venues. The machines were never actually loaded with funds, but instead were there solely to entice users to swipe their cards and enter their PINs. After collecting this information, an error message would appear. These seemingly innocent devices provided criminals with a steady flow of stolen banking information. Because of their placement in high-traffic areas, users did not realize that all users were unsuccessful at withdrawing funds.

Tips to Avoid/Prevent This Scam

When using such ATMs, especially those in high-traffic areas like airport terminals or self-service gasoline pumps, avoid using machines that appear suspicious. It can be tricky, but see if you can tell if the ATM is equipped with high-level encryption software to protect against WiFi scanners and hacking attempts by criminal hackers. If an ATM appears to be malfunctioning or displays an error message after a transaction (or is having any sort of software issue), refrain from using it and report the issue to the ATM owner.

4. Making the Best of What’s Around

An old-fashioned scam that still reaps profits for criminals is the placement of a deposit receptacle in an ATM vestibule with a sign over the automated machine stating it is out of order. Here, the scammer’s goal is to capture cash deposits that were intended for the more secure electronic banking machine. While it may seem obvious that depositing money in this unsecured fashion is a bad idea, the comfort, and trust that people have when entering a financial institution often allows them to suspend their suspicions as they believe that there is no safer place than a bank.

Tips to Avoid/Prevent This Scam

In addition to a lot of the advice above, confirm with bank staff or official channels to ensure the ATM is functioning properly. Avoid depositing cash in unsecured or suspicious locations, opting for well-maintained and secure deposit options you’ve confirmed with your bank. If you come across an ATM marked as “out of order,” report it to the bank immediately and refrain from making any transactions.

5. Demolition Men

Finally, criminals who are too impatient to go through the complex process of stealing bank accounts and personal identification numbers will simply steal an entire ATM. Typically, this crime occurs in the overnight hours inside a business, such as a supermarket. The thieves will break-in, use the store’s forklift (which is normally used for the benign purpose of moving cases of beer and soda) to rip the ATM off the floor and load it onto a waiting truck. As a fully loaded ATM can hold tens of thousands of dollars, these have become prime targets.

Tips to Avoid/Prevent This Scam

This one can be tricky, but you can still take steps to protect yourself. Like the other tips above, ensure the ATM is located in a well-lit and secure area, preferably with surveillance cameras. Inspect ATMs to make sure whether they are affixed to a wall or the ground (or at least that it may be difficult to move). If you do see suspicious activity such as someone scoping out how to move it, report it to the property authorities.

How Many ATMs Are There in the World?

As of 2025, there are more than 3.5 million ATMs around the world.

Are Bitcoin ATMs Safe?

Bitcoin ATMs are terminals or kiosks where individuals can anonymously buy or sell Bitcoins electronically. Even though they are connected to the internet, experts agree that today’s Bitcoin ATMs are safe since they use high-level encryption. Moreover, Bitcoin itself uses a public-private key pair, and nobody can steal or move your bitcoins without your personal private key. The machines are also built with safeguards against physical or hardware malfunction as well as software protections against malware.

Will Entering My PIN # Backwards Alert the Authorities to a Possible Threat?

No. Despite the prevailing urban myth, entering your PIN in reverse (or in any other combination) will not alert the police or the bank. This idea gained popularity in the mid-2000s through the 2010s as viral social media posts suggested this emergency measure. However, it has been confirmed to be false.

The Bottom Line

Don’t let a simple transaction like withdrawing money from an ATM be a way for thieves to get the best of you. To avoid scams like these, listen to the cautionary voices in your head and be careful when something seems amiss. Even in what seems like normal circumstances, shield the keyboard with your other hand when entering your PIN—it’s no fun to be driven to tears by a crime you could have prevented. And of course, if you spot a scam in action, don’t apprehend the criminals yourself—let the police deal with that.

Reviewed by Robert C. Kelly

The “Candle Makers’ Petition” is a satire of protectionist tariffs, written by French economist Frèdèric Bastiat. In many ways, it expanded on the free market argument against mercantilism set forth by Adam Smith, but Bastiat targeted government tariffs that were levied to protect domestic industries from competition.

In Bastiat’s “Petition,” all the people involved in the French lighting industry, including “the manufacturers of candles, tapers, lanterns, sticks, street lamps, snuffers, and extinguishers, and from producers of tallow, oil, resin, alcohol, and generally of everything connected with lighting,” call upon the French government to take protective action against unfair competition from the sun. It argues sarcastically: “We candlemakers are suffering from the unfair competition of a foreign rival.”

Key Takeaways

• The “Candle Makers’ Petition” is a complaint written by French economist Frèdèric Bastiat to his government to oppose import tariffs.
• Bastiat instead favored free markets for international trade and competition and argued that tariffs would have negative unintended consequences.
• Despite the economic theory underlying Bastiat’s argument, protectionism remains a tool used by governments in the global market.

Unintended Consequences

Bastiat argued that forcing people to close “all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds—in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses”—would lead to a higher consumption of candles and related products. In turn, he reasoned, the industries that those in the lighting industry depend on for materials would have greater sales, as would their dependent suppliers, and so on—until everyone is better off without the sun.

This satirical essay suggests that forcing people to pay for something when a free alternative is available is often a waste of resources. In this case, the money people spend on additional lighting products would indeed boost the candle makers’ profit, but because this expenditure is not required, it is wasteful and diverts money from other products. Rather than producing wealth, satisfying the candle makers’ petition would lower overall disposable income by needlessly raising everyone’s costs.

Argument Against Tariffs

Similarly, Bastiat argued, using tariffs to force people to pay more for domestic goods when cheaper foreign imports are available allows domestic producers to survive natural competition, but costs everyone as a whole. Additionally, the money put into an uncompetitive company would be more efficiently placed into an industry in which domestic companies have a competitive advantage.

Bastiat concluded with the following remark:

Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Protectionism Remains

Despite the economic theory in Bastiat’s argument, protectionism remains a tool used by governments in the global market.

Tariffs are just one form of protectionism. Others include import quotas, which are nontariff barriers put in place to limit the number of products that can be imported over a set period of time, and product standards, which are a barrier that limits imports based on a country’s internal controls.

Who Was Frèdèric Bastiat?

Frèdèric Bastiat (1801–1850) was a 19th century philosopher and economist famous for his ideas about the role of the state in economic development. He was known for identifying flaws in protectionism and for his use of satire to shed light on political and economic principles.

What Were Bastiat’s Works?

The “Candle Makers’ Petition” was among a series of essays Bastiat wrote for a book titled “Economic Sophisms,” published in 1845.

Bastiat is also known for two works published in 1850, the year of his death:

• An essay titled “Ce qu’on voit et ce qu’on ne voit pas,” which translates as “What Is Seen and What Is Not Seen,” in which he introduced a concept that would eventually be coined as opportunity cost, by Austrian economist Friedrich von Wieser, 60 years later.
• A book titled “The Law,” in which he outlined how a free society can develop through a just legal system.

What Are Tariffs?

A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages. Tariffs often result in unwanted side effects, such as higher consumer prices.

What Is Protectionism?

Protectionism refers to government policies that restrict international trade to help domestic industries. Protectionist policies are usually implemented with the goal of improving economic activity within a domestic economy, but they can also be implemented for safety or quality concerns.

The Bottom Line

The “Candle Makers’ Petition” is a staple in economics education today. It is often used to teach students about the principles of free trade and the pitfalls of protectionism.

Bastiat’s petition is frequently referenced in discussions about trade policies, thus highlighting the enduring value of its message regarding consideration of broader economic impacts beyond specific industries’ interests. 

Reviewed by Robert C. Kelly

Capital is the lifeblood of any business operation. It helps organizations meet their daily and long-term financial needs, as well as signaling to stakeholders that the firm is on the right track. Companies raise capital through debt and/or equity. Usually, it’s a mixture of the two, which is referred to as the company’s capital structure. 

Analysts review the capital structure of a firm to gain insights about management’s strategic relationship with and reliance on outside capital. A company with a strong growth strategy has a heavy reliance on outside capital. However, a mature company, such as Disney (DIS), can get away with a more conservative approach to capital structure and rely on cash flows generated from operations to propel itself.

Key Takeaways

• Disney’s capital structure remains heavily weighted toward using equity to finance growth, versus debt.
• This remains true even after the company more than doubled its debt load this year with the closing of the 21st Century Fox acquisition.
• Despite leverage ratios that are near decade highs, Disney—compared to its major peers—uses less debt and has a less levered balance sheet.

Capital Structure Overview

Capital structure varies based on industry and corporate financial strategy. Companies using more debt than peers may also be riskier since debt payments must be paid back even if earnings are negative or lackluster. 

Equity, on the other hand, does not need to be paid back, but it generally costs more to raise equity capital than debt, particularly in periods of low interest rates. This is why many companies, such as Disney, have used debt to increase its cash hoard over the past few years, taking advantage of low-interest rates.

Disney’s Debt and Equity Capitalization

Disney’s fiscal year 2024 capital structure highlights a debt of approximately $48.5 billion, paired with $95.2 billion in total equity. The company’s debt-to-equity ratio stands at 0.51, which reveals that Disney has strategically chosen to finance its operations more with equity than debt. This provides a lower-risk profile, as it suggests Disney is not overly reliant on debt to fund its activities.

This 0.51 ratio offers Disney significant financial flexibility. It means the company has room to take on more debt if necessary for expansion or other investments without overwhelming its balance sheet. It’s also a more conservative ratio measurement which is typical of companies aiming to safeguard against market downturns. While using debt allows for faster growth or acquisitions, Disney has maintained a conservative leverage level that protects against potential volatility in interest rates.

Note

Disney raised $316 million in operating income in Q4 2024 driven by Inside Out 2 and Deadpool & Wolverine.

Disney’s Profitability

It’s tangentially related to its capital structure, so let’s look at Disney’s profitability. Disney’s Q4 2024 revenue saw a 6% increase to $22.6 billion, reflecting growth in multiple business segments, particularly media and entertainment. The year-on-year revenue growth of 3%, totaling $91.4 billion. This shows Disney’s diverse operations have adapted and thrived.

Despite revenue growth, Disney’s operating income declined by 6% in Q4, primarily due to rising production and distribution costs. The company faced increasing expenses in areas like content creation, particularly in its streaming services. This means that while Disney has successfully expanded its revenue, the cost of delivering premium content has eaten into profitability. On a more positive note, Disney reported a significant increase in annual net income, going from $4.8 billion in 2023 to $7.6 billion in 2024.

All of this highlights the stability and security in Disney’s operations. This aligns with the company’s capital structure, where the company more conservatively is not necessarily pursuing fast growth. It’s more content generating longer-term value by having raised equity as opposed to needing immediate capital for expansion.

Disney’s Cash Position

Cash isn’t part of a capital structure either, but it is directly impacted by it. If companies are more desperate for cash, it might be more likely they try to raise debt which could be easier or faster to raise compared to equity.

As of the end of fiscal year 2024, The Walt Disney Company reported cash, cash equivalents, and restricted cash totaling $6.05 billion. Throughout fiscal 2024, Disney generated approximately $14 billion in cash from operations, underscoring its robust cash-generating capabilities. After accounting for capital expenditures, the company achieved over $8 billion in free cash flow. Looking ahead to fiscal 2025, Disney also projects generating around $15 billion in cash from operations, with planned capital expenditures of approximately $8 billion.

One way to interpret all of this is that the company is generating enough cash to meet its needs. It does not need to raise more funds by issuing capital or borrowing money. For this reason, barring expansion or potential acquisitions, Disney’s capital structure may remain more stead for the foreseeable future.

What Was Disney’s Total Revenue for Fiscal Year 2024?

Disney generated $91.4 billion in total revenue for fiscal year 2024, reflecting a 3% year-over-year increase. This growth was driven by strong performances in its theme parks, streaming services, and traditional media segments. 

What Is Disney’s Debt Level?

As of the end of fiscal 2024, Disney’s total debt stood at $48.5 billion. This debt consists of short-term and long-term borrowings, used to fund acquisitions, content production, and infrastructure investments.

How Much Shareholder Equity Does Disney Have?

Disney’s shareholder equity reached $95.2 billion, reflecting the company’s retained earnings, assets, and investments. This could be considered a very strong equity position.

What Is Disney’s Debt-to-Equity Ratio?

The debt-to-equity ratio is approximately 0.51, calculated by dividing total debt by shareholder equity. Very generally speaking, a ratio below 1 suggests Disney is not overly reliant on debt and maintains flexibility by prioritizing equity over borrowed funds.

The Bottom Line

Capital is a tool used by companies to finance company operations and growth projects. Some companies prefer the use of debt, especially in low-interest-rate environments. Other companies prefer equity because it doesn’t need to be paid back. Most companies, such as Disney, strive to find some optimal balance between debt and equity to help grow operations without substantially increasing risk. In 2024, Disney’s debt-to-equity ratio was 0.51.

Reviewed by Charlene Rhinehart

Market Capitalization vs. Shares Outstanding: What’s the Difference?

Both market capitalization and shares outstanding refer to public companies, as they have publicly listed shares, whereas private companies do not. However, there are relevant differences between the two. Let’s take a look at what the difference is between market capitalization and shares outstanding.

Key Takeaways

• Two ways to measure the size of a company include market capitalization and shares outstanding.
• Shares outstanding refer to the number of shares of a company held by all of its shareholders.
• Shares outstanding is a component of market capitalization, which is the total number of shares outstanding multiplied by the current share price of a single share.
• Market capitalization values are categorized as small-cap, mid-cap, and large-cap.

What Is Market Capitalization?

Market capitalization, also known as market cap, is a monetary value that changes every day as the share price of a company changes every day. Because companies vary in size, market cap values are divided into categories to help simplify company valuation.

Companies with a market cap of less than $2 billion are considered small-cap. Companies with a market cap of $2 billion to $10 billion are mid-cap, and anything larger than $10 billion is considered large-cap. Large-cap companies are the big ones, such as General Electric (GE), Apple (AAPL), or Starbucks (SBUX). The stocks of these companies are sometimes called blue-chip stocks.

While it may seem that a larger, more established company presents a better investment opportunity, many in the finance industry warn against underrating small-cap stocks. Though newer, smaller companies are more likely to go under than their giant counterparts, they also have exponentially more room to grow. Getting in on the ground floor with a successful small-cap stock can be highly lucrative.

Conversely, the larger a company is, does not necessarily mean it is a better investment. Large companies may be saddled with debt, have limited growth prospects, and a multitude of other problems that come with operating on a larger scale.

Changes in Market Cap

Market capitalization is not a fixed number—it fluctuates constantly based on stock price movements. Since the market cap is calculated by multiplying a company’s share price by the number of shares outstanding, any change in stock price directly impacts the company’s market value.

In addition to stock price changes, corporate actions like share buybacks can significantly impact market capitalization. A stock buyback occurs when a company repurchases its own shares from the open market, reducing the total number of shares outstanding. This can result in a stable or even increased market cap.

Secondary offerings, where a company issues additional shares to raise capital, can dilute existing shareholders and affect market cap in different ways. If the newly raised capital is used effectively for growth initiatives, such as acquisitions or expanding operations, it can increase investor confidence and potentially drive the stock price higher, leading to a larger market cap. However, if investors perceive the dilution negatively—especially if the offering is done out of financial necessity—it may put downward pressure on the stock price, potentially reducing the market cap.

Note

Market cap tells you how large a company is. The higher the market capitalization, the larger it is.

What Are Shares Outstanding?

Shares outstanding refer to the number of shares of a company that are currently being held by its shareholders. When a private company needs to raise capital, it undergoes an initial public offering (IPO), selling ownership in itself by distributing shares on a public stock exchange. A company can distribute more shares at a later date if it needs to raise more capital or conversely buy back stock, reducing the shares outstanding. As such, shares outstanding is a number that changes often.

Changes in Shares Outstanding

Shares outstanding can change due to a variety of corporate actions. Companies may repurchase their own shares to reduce the number of shares outstanding. Meanwhile, stock splits increase the number of shares outstanding without affecting the company’s market capitalization.

One major distinction in shares outstanding is between basic and diluted shares. Basic shares outstanding refer to the total number of shares currently issued and held by investors, including those held by insiders but excluding potentially dilutive securities. Diluted shares outstanding account for all possible shares that could be created if stock options, warrants, or convertible securities were exercised.

Stock options and warrants are also two common instruments. Stock options allow the holder to purchase shares at a predetermined price. When employees exercise their options, new shares are issued. Warrants function like options but are issued directly by the company, often as incentives in financing deals.

Last, convertible securities also impact the diluted share count. These let investors convert their holdings into common shares under specific conditions. Their conversion could increase the number of shares outstanding.

Note

Two companies can have the same stock price but have wildly different market capitalizations. This means that one company is bigger than the other, even if both stocks trade for the same dollar amount.

Market Capitalization Vs. Shares Outstanding: What’s the Difference?

Market capitalization and shares outstanding are closely related but serve distinct purposes. Market cap is the total value of a company’s equity. Shares outstanding is the total number of shares issued and held by investors.

One key difference is that market cap fluctuates constantly with stock price movements, while shares outstanding change primarily due to corporate actions. Market cap can rise or fall based on investor sentiment, earnings reports, or broader economic conditions. The main way shares outstanding typically change is when companies issue new stock, conduct buybacks, or undergo stock splits. The function between the two is very different.

Another distinction lies in their role in investment analysis. Market cap is a primary indicator of company size and is used to compare firms across industries, helping investors assess risk and growth potential. Shares outstanding, however, are more relevant for financial metrics related to dilution effects. We’ll discuss this use in analysis in the next section.

Market Cap and Shares Outstanding Similarities

Market capitalization and shares outstanding are directly connected through the formula: Market Cap = Stock Price × Shares Outstanding. In short, you must know the shares outstanding in order to calculate market cap.

Both market cap and shares outstanding reflect a company’s size and investor perception but in different ways. Market capitalization provides a broad measure of a company’s worth in the stock market, while shares outstanding indicate how ownership is distributed. As both are an indicator of value, the interplay between these two factors determines how a company is valued relative to its peers.

Use in Financial Analysis

Market capitalization is a calculation where one of the inputs is shares outstanding. Because shares outstanding is an input number as opposed to a calculation, it can be used in a variety of calculations in addition to market capitalization.

Other metrics in which shares outstanding provides useful information include earnings per share (EPS) and cash flow per share (CFPS). In theory, any number can be paired with shares outstanding to come up with a per-share valuation.

What Is Market Capitalization?

Market capitalization is the total value of a company’s outstanding shares, calculated by multiplying the stock price by the number of shares outstanding. It represents the company’s overall worth in the stock market.

What Are Shares Outstanding?

Shares outstanding refer to the total number of shares a company has issued that are currently held by investors, including both public and restricted shares. This number changes due to corporate actions like stock buybacks or new share issuances.

How Are Market Capitalization and Shares Outstanding Related?

Market cap is directly calculated using shares outstanding; you find market cap by calculating the stock price with the shares outstanding. While stock price changes frequently, the number of shares outstanding typically changes less often due to corporate actions.

Can a Company Have a Low Stock Price but a High Market Cap?

Yes. If a company has a large number of shares outstanding, even a low stock price can result in a high market cap. 

Why Is Market Cap a Better Indicator of Company Size Than Stock Price?

Stock price alone does not reflect a company’s size, as it does not account for the number of shares outstanding. Consider an example of Firm A with 1,000,000 shares, each worth $100. That company would be worth magnitudes more than a company with 10,000 shares each worth $100.

The Bottom Line

Market capitalization and shares outstanding are closely related but serve different purposes in evaluating a company’s value. Market cap represents the total worth of a company in the stock market, calculated by multiplying the stock price by shares outstanding, while shares outstanding refer to the total number of issued shares held by investors.

Reviewed by Margaret James
Fact checked by Yarilet Perez

Ex Works (EXW) vs. Free on Board (FOB): An Overview

Ex Works (EXW) and Free on Board (FOB) are international shipping standards known as Incoterms that dictate the responsibilities of buyers and sellers. The Incoterms used determine which parties are required to cover the costs and arrangements related to the shipping of goods.

When Ex Works is used, a seller is not obligated to load its goods onto the buyer’s designated method of transport. Instead, the seller makes the products available at a selected location, and the buyer incurs transportation costs for them.

When using Free on Board, a seller is required to load the goods onto the buyer’s method of transport at the shipping point and may be responsible for them throughout the trip and to the final destination. The seller retains ownership and responsibility for the goods until they are loaded “on board” a shipping vessel. Once on the ship, all liability transfers to the buyer.

Key Takeaways

• Ex Works and Free on Board are both international shipping terms.
• Incoterms specify the rules and terms used in international and domestic trade contracts. 
• Ex Works requires that the seller make the product available at a designated location, and the buyer incurs transport costs.
• Free on Board makes the seller responsible for the goods until they are loaded on a shipping vessel, at which point, all liability transfers to the buyer.

Ex Works

Shipping using the designation Ex Works (EXW) indicates the seller has a responsibility to make sure the buyer can access and pick up the cargo at their place of business. EXW can be chosen for any mode of transportation.

Transportation costs and associated risks are no longer a burden for the seller under the EXW option, which favors the shipper.

For example, say a seller of electronic products is located in San Francisco and the buyer is located in New York. The buyer and seller agree on the products’ prices and sign an Ex Works trade agreement. It spells out that the seller must have the products transport-ready for the buyer to pick up in two weeks. After the pickup, the buyer is responsible for all of the further costs associated with transporting the goods to New York City. If the products get lost along the way, the seller is not liable.

Important

EXW often results in cheaper goods; however, the supplier’s risk is increased as they maintain responsibility for the product for longer.

Free on Board

Unlike EXW, when a buyer and a seller enter a Free on Board (FOB) trade agreement, the seller is obligated to deliver the goods to a destination for transfer to a carrier designated by the buyer. FOB can only be chosen when the goods are delivered by ship.

The designated location in a FOB trade agreement is the point at which ownership is transferred from the seller to the buyer. The responsibility often shifts at this arrival location. The seller is responsible for transporting goods up until this point, but the buyer may or may not be responsible for all transportation arrangements from this point to their location, depending on the terms of the agreement.

For example, suppose a buyer in Los Angeles purchases computers from a seller in Chicago and they sign a FOB trade agreement. The buyer determines that the computers are to be shipped by airplane, and the agreement obligates the seller to pay the transportation expenses associated with getting the computers to the Los Angeles airport. At this point, the responsibilities shift, and the buyer must cover all further costs related to transporting the computers to the final destination. The buyer is also liable for any damages that may occur during this phase of the shipping process.

Important

FOB transfers liability from seller to buyer when the shipment reaches the port of origin, not the destination.

Special Considerations

Contracts involving international transportation often contain abbreviated trade terms that describe conditions such as the time and place of delivery, payment, and when the risk of loss shifts from the seller to the buyer. Other items include who pays the costs of freight and insurance. The International Chamber of Commerce (ICC) publishes the standards for the most commonly used delivery contracts.

However, companies that ship goods in the United States must also follow the Uniform Commercial Code (UCC). Because there is more than one set of rules, the parties in a contract must specify which governing laws they use for a shipment.

What Do EXW and FOB Stand for?

EXW stands for Ex Works, an Incoterm whereby the buyer of a shipped product pays for the goods when they are delivered to a specified location. FOB, or Free on Board, instead shifts the responsibility to the buyer as soon as the goods are loaded onboard a ship.

Is Ex Works or Free on Board Better?

Goods shipped EXW will usually be cheaper since a Free on Board agreement means the supplier bears the costs of transportation, handling, and customs clearance. EXW terms, however, are often riskier for the seller since they are responsible for the goods until they reach their destination.

What are EXW or FOB Unit Prices?

In shipping, the unit price refers to the cost to ship a good based on a pre-agreed or standardized unit basis. Examples include coal per ton, oil per barrel, or grain per bushel.

The Bottom Line

The International Chamber of Commerce publishes international and domestic standards for the most commonly used delivery contracts. These rules are called Incoterms. ExWorks and Free on Board are two of the rules that define which party is responsible for a shipment and its costs at certain stages of delivery.

Divorce rates are rising for people over 50

Reviewed by Pamela Rodriguez

The “gray divorce” rate—divorce among people over age 50—has been rising, with the rate among people 65 and older nearly tripling between 1990 and 2022. If your marriage is dissolving, the last thing you want is to find yourself alone with legal fees, therapist bills, and disappearing retirement dreams. To make sure you’re on solid financial footing, you’ll need to avoid these 12 common money mistakes, including financially supporting your kids, holding onto the family home, and underestimating your expenses.

Key Takeaways

• Divorce rates for people aged 50 and over are rising.
• Household income after a divorce drops much more for women than for men.
• At a minimum, you need a divorce lawyer and a certified divorce financial analyst (CDFA) to help you navigate the process.
• Make sure to create an inventory of all your assets and your debts.
• Don’t forget to include retirement accounts, health insurance, and tax implications.

The Financial Fallout of Divorcing After 50

Divorce rates in the United States declined between 2011 and 2021, according to the Census Bureau. Except for people over 50, and especially those 65 and older, as noted above.

“If late-life divorce were a disease,” said Jay Lebow, a psychologist at the Family Institute at Northwestern University, “it would be an epidemic.” As married couples grow older, the glue that holds many marriages together dissolves, whether that’s children, shared interests, or financial dependence.

Divorce at this age can be financially devastating. The cost of living is considerably higher when you’re single than when there are two of you who share expenses. More worrisome, a mid-to-late-life split can shatter retirement plans. There’s less time to recoup losses, pay off debt, and weather stock market fluctuations. Also, you may be approaching the end of your peak earning years, so there’s less chance of making up financial shortfalls with a steady salary.

These concerns are magnified for women. After a divorce, household income for women can drop precipitously. In fact, according to the U.S. Census Bureau, 20% of women (vs. 11% of men) who had divorced in the previous 12 months had fallen into poverty. What’s more, because women’s life expectancy is about 81 years (versus 76 years for men), a divorced woman can find herself living for a lot longer with a lot less.

Below, we list some of the major mistakes that divorcees make, especially when they’re over age 50.

1. Failing to Create an Inventory of Assets

One partner often has a better understanding of a couple’s finances than the other. This person likely has a solid idea of how much money their investment accounts hold, the value of their assets, and how much cash is in their savings accounts, while the other partner isn’t as up to speed.

If you’re the latter person, you’ll want to take an inventory of all assets before attempting to split them up. In addition to knowing what’s in your bank accounts, you should also track your retirement accounts and life insurance policies.

If you are concerned about your finances, visit your local legal aid website, where you may be able to ask for pro bono legal assistance and/or representation in a civil case if your divorce heads to court.

2. Holding Onto the House

If you end up with the family home, think long and hard about keeping it. It may be your refuge, and not moving might seem less disruptive for any children still living at home. Still, it can also be a money pit, especially with only one person paying for the upkeep, property taxes, and emergency repairs.

Before deciding to stay, figure out if you can afford the mortgage and the costs associated with maintaining the property. Also, keep in mind that property values fluctuate, so don’t assume you can sell your house for the amount you need if money becomes an issue.

3. Not Knowing What You Owe

OK, you may know what you owe, but do you know what your spouse’s debt is? In the nine states with community property laws, you’ll be held responsible for half of what they owe even if the debt isn’t in your name.

Even in non–community-property states, you may be liable for jointly held credit cards or loans. Pre-divorce, be sure to get a full credit report for both you and your spouse, so there are no surprises about who owes what.

Important

The nine states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, all assets that accrue to a couple during their marriage through any means other than inheritance or as a gift are owned 50/50 by the husband and wife. Debts, too.

4. Ignoring Tax Consequences

Almost every financial decision you make during a divorce comes with a tax bill. Should you take monthly alimony or a lump-sum payment? Is it better to have a brokerage account or a retirement plan? Will you keep the house or sell it? And who should pay the mortgage until it sells?

For example, you might be excited to know that your soon-to-be-ex will be handing over an investment account with gains of $100,000, but that portfolio comes with a tax hit. This effectively lowers the amount you’ll receive. Even providing child support can have tax implications, so consult an accountant or tax advisor to determine what makes the most sense for your situation before divvying up assets.

If you need help with your taxes after a divorce, you may be eligible for tax relief from the government. In order to qualify for this federal benefits program, you must be separated or divorced and be a taxpayer. The program can help you find someone to help you with tax return preparation.

5. Forgetting About Health Insurance

If your spouse’s policy covers you, you may be in for a nasty—and expensive—surprise, especially if you divorce before Medicare kicks in at age 65. Basically, there are three options:

• Your employer can cover you
• You can sign up for your state’s healthcare exchange under the Affordable Care Act (ACA)
• You can continue to use your ex’s existing coverage through COBRA for up to 36 months, but the cost is likely to be substantially more than it was before the divorce

If new, separate health insurance policies threaten to break the bank, you may want to consider a legal separation. Under certain circumstances, you can keep your ex’s health insurance while separating your other assets.

6. Rolling Over Your Ex’s Retirement Account Into an IRA

If you experience financial difficulties after divorce, keep in mind that individual retirement account (IRA) laws can trump those financial problems. So if you fund your own new IRA with your share of your ex’s retirement account and tap it before age 59½, you’ll still pay the standard 10% early withdrawal penalty.

There is a solution: You may be able to protect the IRA assets in your divorce settlement through a qualified domestic relations order (QDRO), which allows you to make a one-time withdrawal from your ex’s 401(k) or 403(b) without paying the standard 10% tax, even if you’re under age 59½. 

7. Financially Supporting Other Adults

You may find it necessary to use your finances to help others around you. But it’s important to take a step back. No matter how much you’d like to help your adult children or other adult family members, your priority is to ensure you have a healthy retirement income.

Warning

Find out your state’s laws regarding divorce and paying for a child’s higher education. Some states stipulate that divorced parents share payments for university expenses while other states view college as a conditional expense and not part of a divorce settlement.

8. Hiding Assets From Your Spouse

In divorces in which a lot of money is at stake, you may be tempted to hide assets, so it looks like you have less money to contribute. Doing this could set you up for legal troubles plus legal fees and court time if the assets are found.

Some of the repercussions for hiding assets from your spouse include a settlement that will give your spouse additional assets, a contempt-of-court ruling, or fraud or perjury charges.

9. Underestimating Your Expenses

When the income that once covered one set of household expenses is suddenly divided by two, you may have to make some changes to your spending to afford your daily and monthly expenses. Take a realistic look at how much money you’ll need to live on, and make sure you can cover all of your expenses after the divorce without relying on your ex.

10. Thinking Your Divorce Advisors Are Your Friends

What you pay your divorce advisors comes out of the settlement you get. Keep track of how much they are spending on your behalf. Remember that while conversations with your attorney may seem friendly and personal, this is a paid professional who is charging you by the hour for every interaction.

11. Overlooking the Value of a Future Pension

Don’t forget to include any part of a pension that was earned during the marriage. According to the Institute for Divorce Financial Analysts (IDFA), there are three methods of doing this:

1. The nonemployee spouse can receive their share of a future benefit.
2. The pension can be present valued and offset.
3. Both (1) and (2) can be combined.

When choosing your solution, be sure to keep your specific needs top of mind. What good does it do you to look forward to a solid pension down the road if you need the cash to survive now?

12. Not Having a Team

Having a good divorce team is essential, so don’t skimp on your professional assistance. The IDFA considers the necessary minimum to be a divorce lawyer and a certified divorce financial analyst (CDFA), while noting that other possible members could be a mediator, an accountant, a business or pension valuator, and a child or individual therapist.

The IDFA advises that having the right assortment of pros to help you can actually reduce the cost of litigation while averting expensive mistakes you might make on your own. Of course, be certain to do your due diligence first before signing them up.

How Does Getting Divorced Affect Social Security Limits?

If you are age 62 or older and divorced from a spouse who is entitled to Social Security retirement benefits, you may be still able to receive benefits based on their records, if you meet certain requirements.

How Can You Protect Your Pension When Divorcing?

A pension earned by one spouse is looked at as a joint asset. This means your spouse may be entitled to half of it after divorce. You can protect your pension by reviewing your pension plan’s rules for how to divide the pension, propose financial alternatives to splitting your pension with your spouse, and, as always, talk to a certified financial advisor who specializes in divorce.

How Does Divorce Affect Your Life Insurance?

When you get divorced, it is likely you will want to remove your ex-spouse’s name as the primary beneficiary of a life insurance policy. If your policy is revocable, you can simply change the name. If your policy has a cash value, you may have to split the monetary value of the policy.

How Does a Prenup Affect a Divorce?

A prenuptial agreement usually outlines the distribution of assets so that in the event of a divorce, couples can avoid fighting over them. A prenup contract lists each spouse’s property and assets and states how everything will be treated in the event of a divorce. A prenup may also outline how you will agree to split up financial assets.

The Bottom Line

Divorce rates are dropping for people in most age groups. But for people over 50, the divorce rate is much higher than it is for married people who are younger. Although divorce can be devastating at any age, there are several mistakes you can avoid to save yourself from financial heartbreak in the future. A good place to start is by making sure you list your assets and your debts, disclosing all your assets to your spouse, and ensuring that you’re covered with health insurance.

Reviewed by JeFreda R. Brown

Vanguard Equity Income Fund Investor Shares (VEIPX) and Vanguard Dividend Growth Fund Investor Shares (VDIGX) are two Vanguard mutual funds that invest predominantly in domestic equities of companies that pay regular dividends.

While having somewhat similar investment objectives, these two funds differ on several fronts. Each has different exposure to sectors, numbers of holdings, management styles, and investment selection processes. Additionally, while VEIPX focuses more on large-cap value stocks, VDIGX holds a variety of large-cap stocks.

Key Takeaways

• Dividend funds are mutual funds that focus on buying stocks that pay higher-than-average or rising dividend yields.
• Vanguard Dividend Growth Fund Investor Shares and Vanguard Equity Income Fund Investor Shares are two dividend mutual funds offered by the investment management company Vanguard.
• While both funds focus on dividend-paying equities, they differ in many respects—the number of stocks held, asset allocations, and stock-picking methodologies.
• Like many Vanguard mutual funds, Vanguard Dividend Growth Investor Shares and Vanguard Equity Income Investor Shares have been reliable, low-cost vehicles for longer-term investors.

Investment Objectives

Peter Fisher—an industry veteran with 25 years of investment management experience, who took over the fund in 2024 from long-time manager Don Kilbride—manages Vanguard Dividend Growth Investor Shares and Vanguard International Dividend Growth Fund (VIDGX). Like his predecessor, Fisher prefers a concentrated portfolio of around 50 stocks of companies with strong competitive advantages. As of January 2025, the fund held 43 stocks.

Vanguard Dividend Growth Investor Shares holds companies with consistent dividend growth and does not necessarily own stocks that currently have above-average yields. In fact, the fund stays away from companies after dividend yields spike, which may signal upcoming dividend cuts. The result is a 30-day SEC yield of 1.56% as of January 2025. Additionally, the fund may, at times, look for stocks that have respectable payout ratios, which can sustain dividend growth going forward.

Vanguard Equity Income Investor Shares, on the other hand, tends to focus on stocks of high-yielding companies with low valuations, but promising growth prospects. This has led Morningstar to classify the fund under the large value category for its distinct emphasis on holding undervalued equities.

The fund typically holds a much larger number of stocks with lower price-to-earnings (P/E) ratios. The total number of stocks in the portfolio is 196 as of January 2025.

Michael Hand of Wellington Management advises Vanguard Equity Income Investor Shares, as well as Vanguard Quantitative Equity Group’s Sharon Hill. The fund focuses on higher-yielding dividend stocks, with a 30-day SEC yield of 2.42% as of January 2025.

$3,000

The minimum amount for initial investments into Vanguard Dividend Growth Investor Shares or Vanguard Equity Income Investor Shares mutual funds.

Sector Exposure

These funds also differ in their sector allocations based on their investment selection processes. The largest sector allocations in Vanguard Dividend Growth Investor shares are:

• Health care (19.7%)
• Industrials (16.4%)
• Information Technology (15.9%)

Vanguard Equity Income Investor Shares, on the other hand, favors:

• Financials (22.3%)
• Health Care (14.6% allocation)
• Industrials (12.0% allocation)

Investment Performance

When it comes to investment performance, VDIGX has slightly outperformed over longer periods of time compared to VEIPX. For the 10-year period ending Jan. 31, 2025, the fund generated an average annual return of 11.06%, while VEIPX posted a 10.75% return.

However, the same has not been true in the short term. Over the last three- and five-year periods, VDIGX generated annualized returns of 6.07% and 9.92%, respectively. VEIPX’s returns for the same periods were 8.88% and 11.18%, respectively.

VDIGX is a two-star rated fund by Morningstar, while VEIPX is rated four stars as of 2024. VDIGX’s expense ratio comes in at 0.29%, while VEIPX’s is 0.27%.

When Were VDIGX and VEIPX Established?

Both VDIGX and VEIPX are relatively old funds. VDIGX was established May 15, 1992, while VEIPX was established Mar. 21, 1988.

What Are the Three Largest Holdings in VDIGX and VEIPX?

VDIGX is weighted more heavily in tech companies, while VEIPX is more heavily weighted toward financial and healthcare companies. VDIGX’s three largest holdings are Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Stryker Corp. (SYK). Meanwhile, VEIPX’s largest holdings are Broadcom Inc. (AVGO), JPMorgan Chase & Co. (JPM), and Johnson & Johnson (JNJ).

How Often Do VDIGX and VEIPX Pay Dividends?

VDIGX and VEIPX both pay dividends to shareholders. VDIGX typically pays a dividend semi-annually, typically at the end of March, June, and December. In contrast, VEIPX pays a quarterly dividend, in mid-March, June, September, and December.

The Bottom Line

Vanguard Equity Income Fund Investor Shares and Vanguard Dividend Growth Fund Investor Shares are both Vanguard mutual funds that provide exposure to large cap U.S. stocks that pay reliable dividends. While the funds both have a focus on dividend-paying companies, they have different approaches when it comes to investment objectives, sector exposure, number of holdings, and management style.

Reviewed by JeFreda R. Brown

The thought of “being your own boss” is sure exciting and if you plan to do it by setting up your business and are ready with a business plan, the next crucial step is deciding the right business structure. This decision has far-reaching repercussions for the business and thus requires careful selection. Factors like personal liability, regulations, tax treatment, etc are governed by the form of your business entity which could be a Sole Proprietorship, Corporation, Partnership, or a Limited Liability Company (LLC).

One easy, efficient, and fast way to start a company is to set up a Limited Liability Company (LLC). Let’s explore what exactly an LLC is, its suitability, advantages, and disadvantages, along with other fundamental factors that can help you decide if an LLC is right for you and your business.

Key Takeaways

• The most common forms of business structures are sole proprietorships, corporations, partnerships, and limited liability companies (LLCs).
• An LLC is a hybrid structure that combines some features and benefits of a corporation and others of a partnership or sole proprietorship.
• Like a corporation, LLCs provide their members with limited liability. And like a partnership or sole proprietorship, LLCs have pass-through taxation so profits are taxed as part of the members’ personal income.
• However, LLCs have some drawbacks too. For example, the members of an LLC have to pay self-employed taxes. Also, fees are higher than in sole proprietorships or general partnership

What Is an LLC?

The LLC is a relatively newer form of business entity in the U.S. It was Wyoming that enacted the first formal LLC statute in 1977. The act amalgamated the beneficial features of a partnership and corporations and was based on the German Code and the Panamanian LLC. Initially, the IRS ruled in 1980 that LLCs would be taxed as corporations, which prevented them from gaining popularity. However, in 1988 the IRS changed its rules to allow LLCs to be taxed like a partnership. Over the years since then, all states have passed legislation to permit LLCs.

An LLC is a hybrid form of business entity that has selected features of a corporation and a partnership. It has been structured in a way to benefit from the pass-through taxation feature of a partnership along with allowing flexibility in operation and management and yet have limited liability like in the case of a corporation.

In the U.S., LLC laws are governed by individual states but are recognized in all. The laws further vary across countries. The “owners” of the company, in the case of LLCs, are referred to as “members.” Usually, a single person can start an LLC and there is no upper ceiling on the number of members.

There are many established and well-known companies that are structured as LLCs. A few names are FCA US LLC (Chrysler automobiles), Westinghouse Electric Company LLC, and Blockbuster LLC. Some businesses like banks and insurance companies are ineligible to be LLCs.

Advantages

Registering your company as an LLC has many benefits. Let’s take a look at some of the biggest advantages below.

Limited Liability

This is one of the features of an LLC in which it resembles a corporation. LLC provides its owners a protective shield against business debt and liability.

Let’s take an example, there is a shoe store “boot & boot” owned by Jimmy that loses its customers to one of the more fancy stores around the corner. The business is not doing well and the company hasn’t paid rent for the last eight months and bills for three shipments of shoes. Thus, “boot & boot” owes approximately $75,000 to its creditors who have filed a lawsuit against the company.

In this case, the creditors have full right to claim the money owed from the company but have no right to Jimmy’s personal assets (bank deposits or gold or real estate). In an LLC, only the company’s assets can be liquidated to repay the debt and not the owners. This is a big advantage that is not provided by a sole proprietorship or partnership where owners and the business are legally considered the same adding vulnerability of personal assets.

Taxation

The company is not taxed directly by IRS as an LLC is not considered a separate tax entity. Instead, the tax liability is on the members who pay through their personal income tax. Let’s look at an example.

Say “boot & boot” has two members and has made net profits to the tune of $60,000 in a year. The net profits will be divided into two (number of members) and this amount will be taxed as their personal income depending upon their overall tax liability. Because of non recognition of LLC as a business entity for taxation purposes, the tax return has to be filed as a corporation, partnership or sole proprietorship.

Remember that certain LLCs are automatically classified by IRS as a corporation for tax purposes, so be sure to know if your business falls in this category. Those LLCs that not automatically classified as a corporation can pick the business entity of choice by filing the Form 8832. The same form is used in case the LLC wants to change the classification status.

Fewer Hassles

Among all forms of companies, starting an LLC is easier, with fewer complexities, paperwork, and costs. This form of company comes with a lot of operational ease with less record-keeping and compliance issues. LLCs also provide a lot of freedom in management as there is no requirement to have a board of directors, annual meetings, or maintain strict record books. These features reduce unnecessary hassles and help save a lot of time and effort.

The formation of an LLC broadly requires filing the “articles of organization” which is a document including basic information like business name, address, and members. The filing is done with the Secretary of State for most states and has an associated filing fee.

Next comes creating an Operating Agreement, which though not mandatory in most states is recommended especially for multi-member LLCs. On registration of the business, other licenses and permits have to be obtained.

Additionally, some states like Arizona and New York require publishing about the LLC formation in the local newspaper.

Flexibility in Allocation

LLC provides a lot of flexibility when it comes to investing as well as profit sharing.

In an LLC, members can opt to invest in a different proportion than their ownership percentage i.e. a person who owns 25% of the LLC, need not contribute money in the same proportion for the initial investment. This can be done by creating an operating agreement, which states percentages of company profits (and losses) for each member regardless of the amounts of their initial investments. So it’s possible to have an outside investor put money in the business without ownership.

The same applies to the distribution of profits where LLC members have the flexibility to decide the allocation of profits. The distribution of profits can be in a different proportion than ownership. A certain member may take a bigger chunk of profits by consensus for the extra hours or effort they have put into carrying out the business.

Disadvantages

While a limited liability company (LLC) offers an edge over some of the other forms of business entity, there are also some drawbacks that need to be looked at before selecting an LLC as the business structure.

Limited Life

The life of an LLC is limited by the tenure of its members. While there can be variations across states, in most of them the business is dissolved or ceases to exist when a member departs an LLC further requiring the other members to complete the remaining business or legal obligations needed to close the business. The rest of the members can choose to set up a new LLC or part ways. This weakness of an LLC can be overcome by including appropriate provisions in the operating agreement.

Self-Employment Taxes

The members of an LLC have to pay the self-employed tax contributions towards Medicare and Social Security as they are considered self-employed. Due to this, the net income of the business is subject to this tax. To avoid this, depending upon the business turnover and tax burden, the entity can choose to be taxed like a corporation if it works out more beneficial. Consult an accountant before making this choice.

Fees

The fee that is typically paid by an LLC as initial costs or ongoing charges is more than that for business entities like sole proprietorships or general partnerships, but less than what a C-corporation has to pay. The various types of fees include applicable state filing fees, ongoing fees, and annual report fees.

Precedent Is Less

LLCs are a relatively newer business structure and thus there have not been many law cases related to them. For this reason, there is not as much legal precedent or case law for LLCs as there is for the older forms. Having a certain legal precedence helps to act accordingly in the same given case scenario. There is more vulnerability as there are few established laws.

What’s the Difference Between a Corporation and an LLC?

The main difference between a corporation and an LLC is that a corporation is owned by its shareholders, and an LLC is owned by one or more individuals, referred to as “members.” Corporations must comply with certain formalities such as shareholder meetings, while LLCs provide more flexibility in terms of management.

What’s the Difference Between a Partnership and an LLC?

The main difference between a partnership and an LLC is that a partnership doesn’t have any separate legal entity from its partners, while an LLC does. This means that an LLC separates the business assets of the company from the personal assets of the members. This provides protection to the members and insulates them from the business’s debts and liabilities in the event it fails.

What Are Some Examples of Well-Known LLCs?

Alphabet, Google’s parent company is an LLC. Other well-known companies that are LLCs include Pepsi-Cola, Sony, Nike, and eBay.

The Bottom Line

LLCs are a good combination of protection with flexibility and tax benefits. It provides an array of taxation alternatives while shielding individual members from personal liability. LLCs are seen as apt for small businesses as there is less hassle and complexity in their functioning. However, consulting an accountant or lawyer for expert opinion is advisable before taking the final call.

Women still earn less than men for comparable work in 2025 America

Reviewed by Erika Rasure

The gender wage gap is the disparity in incomes between men and women for doing the same work. Also known as the gender pay gap, it has narrowed since the 1960s but remains significant. Closing the gap has become an important focus for governments, nonprofit organizations, and businesses. This article focuses on the gender wage gap in the U.S., its long history as a political issue, and where it stands today.

Key Takeaways

• The gender wage gap refers to pay disparities between men and women doing the same work. There is also a racial wage gap.
• Congress didn’t take major action to address the gender wage gap until the passage of the Equal Pay Act in 1963, although the “Equal Pay for Equal Work” movement dates back to the 1860s.
• The gender wage gap has generally narrowed over the years, but in 2023, women earned less than 83 cents for every dollar that men earned, a 1.5% drop from the 84 cents they earned vs. men in 2022.

Early History of the Wage Gap

Though the gender wage gap probably dates to the beginnings of civilization, it emerged as a political issue in the U.S. in the 1860s under the rallying cry of “Equal Pay for Equal Work.”

Among the movement’s most vigorous advocates were women’s rights activists Susan B. Anthony and Elizabeth Cady Stanton, who made a case for bridging the wage gap in their newspaper, The Revolution, and other works.

Women eventually won the right to vote in the U.S. with the ratification of the 19th Amendment to the Constitution in 1920. Nevertheless, the wage gap persisted.

The 1940s: A Failed Attempt to Bridge the Gap

Winifred Claire Stanley, a Republican member of Congress from New York, introduced a bill in 1944 titled “Prohibiting Discrimination in Pay on Account of Sex.” It would have amended the list of unfair labor practices in the National Labor Relations Act of 1935 to include discriminating “against any employee, in the rate of compensation paid, on account of sex.” Stanley’s bill never made it through Congress.

Note

Other wage gaps exist in the pay disparities between White workers and Black and Latino/Latina workers, along with the pay of workers in the U.S. and those in other countries.

The 1960s: Major Strides for Equal Pay and Civil Rights

The next major attempt to address the inequity on a national level came two decades later, with the passage of the Equal Pay Act in 1963. It prohibited employers from paying male and female workers different wages for “jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” However, it also allowed for several exceptions, including pay structures based on seniority or merit.

In signing the bill into law, then-President John F. Kennedy said that paying men and women different wages for the same work was an “unconscionable practice” and cited a statistic that “the average woman worker earns only 60% of the average wage for men.”

A year later, in 1964, Title VII of the Civil Rights Act also addressed the wage gap, broadening the law to make compensation decisions based on race, color, religion, sex, or national origin unlawful. As with the Equal Pay Act, there were multiple exceptions, again including seniority- and merit-based wage programs.

The 1970s and 1980s: A Call for Comparable Worth

In the 1970s and 1980s, the concept of comparable worth (or pay equity) entered the national conversation. Its proponents called attention to wage gaps among workers in jobs that, while not identical, could be considered similar in terms of skills, responsibility, and value to the overall enterprise. Often, they argued, those gaps were a legacy of past discrimination.

“Many women and people of color are still segregated into a small number of jobs such as clerical, service workers, nurses, and teachers,” the advocacy group National Committee on Pay Equity explains. “These jobs have historically been undervalued and continue to be underpaid to a large extent because of the gender and race of the people who hold them.”

Eleanor Holmes Norton, chair of the Equal Employment Opportunity Commission (EEOC) during the Carter administration, singled out comparable worth as “the issue of the 1980s.” But the Reagan administration, which followed, disagreed. Then-President Ronald Reagan reportedly called it “Mickey Mouse, a cockamamie idea…[that] would destroy the basis of free enterprise.” Pay equity and comparable worth made little progress on the federal level but did become law in several states.

The 2000s: Win Some, Lose Some

There were no major changes in the laws around payment by gender in the 1990s. Although the gender wage gap continued to shrink, it did not close.

A 2007 U.S. Supreme Court case, Ledbetter v. Goodyear Tire and Rubber Co., led to the next major federal law. Lilly Ledbetter sued her employer under the Civil Rights Act, alleging that it underpaid her for 19 years. A jury awarded her more than $3.5 million, but the company appealed, arguing that she failed to file her suit within 180 days of when the discrimination first occurred, as prescribed by law. An appeals court reversed the original decision, and the Supreme Court also ruled against Ledbetter in a 5 to 4 vote.

Dissenting justice Ruth Bader Ginsburg suggested it was now a matter for Congress to take up, which the legislative branch soon did. The Lilly Ledbetter Fair Pay Act, which passed in 2009, expanded the period for filing a discrimination claim, making it easier for other women to sue employers they believed discriminated against them. It was the first piece of legislation signed into law by then-President Barack Obama just nine days after his inauguration.

The Paycheck Fairness Act was another major legislative proposal addressing the wage gap, first introduced in 2009. Among other things, it called for greater enforcement of antidiscrimination laws and increased penalties for violators. The Paycheck Fairness Act initially passed the U.S. House but failed in the U.S. Senate. It has been reintroduced several times since then, including in 2021 when it again passed the House.

Important

Financial inequality among the genders is reflected in numerous ways aside from the wage gap. For example, when a company sells products aimed at women for more than comparable products for men, it is informally called a pink tax. And the “tampon tax” is an actual sales tax that many states impose on feminine hygiene products.

The Mid- to Late 2000s and 2020s

Despite progress on the legislative front over the past 100 years, the wage gap has been slow to narrow. According to the U.S. Census Bureau, women working full-time in 1960 earned about 60 cents for every dollar earned by men—the number cited by President Kennedy in signing the Equal Pay Act.

Though the numbers gradually inched up over the next 30 years, they didn’t reach 70 cents until 1990. Women earned less than 83 cents for every dollar earned by men in 2023, the most recent year for which data are available. This represents a drop of a 1.5% from the 84 cents women earned vs. men in 2022. This is shown in the graphs below from the U.S. Census Bureau.

The top graph shows how the female-to-male earnings ratio is at 82.7%. The bottom graph illustrates the annual earnings of male and female full-time workers. Women earn about $11,500 less on average than their male counterparts.

Full-time earnings for women have increased at a faster rate since 2000. Full-time female workers earned a median income of $45,800 per year in 2000 compared to $55,240 in 2023. Meanwhile, full-time male workers earned a median income of $62,1200 in 2000, rising to $66,790 in 2023.

More Women Working Full-Time

Considerably more women now work full-time. The table below shows a 26.7% increase in full-time female workers since 2000, more than 10 percentage points higher than the increase for men.

Moving from part-time to full-time work also means that more women may now be eligible for employee benefits, such as health insurance coverage and retirement plans.

Equal Pay Day

Equal Pay Day was established in 1996 by the National Committee on Pay Equity. It was created to highlight the differences in pay between men and women and, more important, how “far into the year women must work to earn what men earned in the previous year.”

On Equal Pay Day 2023, which fell on March 14, 2023, the Biden Administration announced steps to close the gender wage gap and to provide women with access to better jobs. The announcement was made after the president signed an executive order to close the wage gap. The order included:

• Providing access to better-paying construction jobs
• Supporting efforts for equal pay in different states through pay transparency legislation
• Boosting pay equity among federal contractors

In signing the order, President Biden also encouraged private companies to follow suit.

Equal Pay Day 2024 occurred on March 12, 2024, and the National Committee on Pay Equity has set March 25 for Equal Pay Day 2025, denoting slippage in the gender gap.

The Gender Wage Gap by Race

The gender wage gap also varies significantly by race. According to 2023 data from the U.S. Department of Labor, Hispanic women earned just 57.8 cents for every dollar earned by White non-Hispanic men, while Black women earned 66.5 cents, White non-Hispanic women earned 79.6 cents, and Asian women earned 94.2 cents.

134

The number of years it will take, based on current data, for the global gender wage gap to close.

The Gender Wage Gap by Age

In recent years, young women between the ages of 25 and 34 who are in the early years of their working lives have managed to narrow the gap with men, according to the Pew Research Center. Since 2007 their earnings have been about 90 cents or even more to the dollar compared to men of the same age.

But the wage gap subsequently widens as those women age. For example, women who were age 25 to 34 in 2010 were making 92% of what a man the same age made. Yet, in 2022, when they were 37 to 46 years old, they were making only 84% of men the same age. And as women continue to age, the gap keeps widening—a pattern that the Pew Research Center notes “has not changed in at least four decades.”

Why Do Women Get Paid Less Than Men?

Although a multitude of reasons contribute to why women are often paid less than men, some of the main contributors include discrimination, differences in the fields that women often work in, education levels, and differences in years of experience.

Which Occupations Have the Highest Gender Wage Gap?

Jobs in which the gender wage gap is higher than others include finance managers, retail sales, education and childcare administrators, and administrative assistants.

Which Industries Have the Smallest Gender Wage Gap?

Industries in which women earn comparable salaries to their male counterparts include tutors, personal care and service workers, interior designers, and dietitians and nutritionists.

The Bottom Line

Income inequality on the basis of gender has lessened over time, but significant progress has stalled over the past two decades. Women are still often underpaid in comparison to men, and there are more levels of inequality within the wage gap when it comes to race and type of occupation. Closing it remains unfinished business in making the United States a more equitable nation.