Equity is what's left for the owners once you subtract what a business owes from what it owns. This guide explains owner's equity and shareholders' equity.
Published July 2026 · Updated July 2026
Equity is the owners' share of the business, what would be left if you sold every asset and paid off every debt. It's the balancing figure in the accounting equation: assets minus liabilities.
Equity grows when the business makes a profit or the owners put money in, and shrinks with losses or when owners take money out (drawings or dividends). Tracking equity over time shows whether the business is building or eroding value.
No. Equity is an accounting measure of the owners' stake; it isn't a pot of cash you can withdraw. Much of it may be tied up in assets.
The idea is the same; it's just labelled differently, owner's capital for a sole trader, shareholders' equity for a company.
Source: Investopedia ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.