# What is Liquidation Preference?

The right of preferred shareholders to be paid back first in a sale or wind-down, typically one times their investment, before common shareholders receive anything. It decides who gets what when a company sells for less than hoped.

## In real work

The startup sold for $6 million, and the 1x liquidation preference returned the investors' $5 million first, leaving $1 million for common shareholders.

## Related terms

- [SAFE](https://prompthausapp.com/learn/safe.md)
- [Valuation Cap](https://prompthausapp.com/learn/valuation-cap.md)
- [Dilution](https://prompthausapp.com/learn/dilution.md)
- [Pro Rata](https://prompthausapp.com/learn/pro-rata.md)
- [Limited Partner](https://prompthausapp.com/learn/limited-partner.md)

## How is this different from Googling it?

Google gives a definition. Prompthaus pairs each term with how it shows up in standups, PRs, prompts, and design reviews. Then it quizzes you until the word sticks. One term a day on iPhone.

- Category: Venture
- HTML: https://prompthausapp.com/learn/liquidation-preference
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