The ownership interest in a company or the residual claim on assets after deducting liabilities.

Equity refers to the ownership interest or stake that the owners (shareholders or partners) hold in a business. It represents the residual value of assets after deducting liabilities. In simpler terms, equity represents the net worth of a business, representing the owners' claim on the company's assets. For small business owners, equity represents the value that the business owners have invested or retained in the company. It can be built through initial investments, reinvested profits, or additional contributions over time. Equity provides a measure of financial stability and serves as a cushion to cover any outstanding liabilities. Small business owners often use equity to attract investors or secure financing. It can be used to determine the valuation of the business, calculate ownership percentages, and distribute profits among shareholders or partners. Understanding the concept of equity is crucial for small business owners as it affects decision-making, financial planning, and the overall health of the business. By monitoring and managing equity effectively, small business owners can strengthen their financial position and potentially attract additional capital for growth opportunities.