• October 2018
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Is there a difference between getting equity, stock, and shares? Is it better to get one over the other?

There is no financial or legal distinction between stock and shares. Stock is a catchall term, used generally to refer to owning an unspecified number of shares in a company.

Shares is more specific, referring to how a company’s stock is divided. Owning stock in a corporation means you own a specific number of shares.

Equity is also often used to describe ownership in a company. Equity can mean stock or shares, although it’s often used to refer to stock options as well.

Stock options give you the right to buy a certain number of shares at a certain price after a certain amount of time. They do not represent ownership, however, unless your right to buy them has vested. Until then, there’s no equity. You can obtain additional information that clearly and concisely explains how stock options work here.

Equity is also used to refer to ownership outside the corporate business structure. For instance, you might own equity in your house, which is generally the difference between its value and what you owe. For non-corporate businesses (e.g., partnerships), equity is determined by subtracting liabilities from assets. For instance, if you and your business partner are 50/50 owners, and your business assets are $300,000 and your liabilities are $100,000, that leaves $200,000 of business equity, with each partner’s equity valued at $100,000.

Stock is a type of equity that’s commonly referred to as an equity investment. When you buy stock as an equity investment, you’re expecting its value to increase and to derive income from its dividends or the profit you make from its sale (capital gains).

Since the terms are nearly synonymous, you might think of equity as the umbrella term that means an ownership interest whether expressed as stock or not. Shares are one expression of equity, but not the only kind since you can own equity in a non-corporate business or investment property.

As an equity owner or shareholder, you would be best served by seeking advice from an experienced startup attorney who can help you with your specific questions. To learn more about owning stock, stock options and business equity, take a look at my company LawTrades. We have highly experienced, vetted attorneys available to assist for low flat-rates. We also have another feature called LawTrades Micro which might interest you. For a low flat-rate (typically $25) you can ask one of our experienced attorneys a question and receive a customized answer within 48 hours. Hope this helps!

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