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What Is the Difference? Shareholder vs. Equity Holder?

Updated: Aug 13, 2020

What is a shareholder? A shareholder is a person who owns shares of stock in a company. Whether public or private, a share of stock in a company represents a fractional ownership interest, and may be sold to the public through an offering, or privately placed. If you buy shares of stock, you own a proportional ownership interest, based on the number of shares you own and the total number of outstanding shares. For example, if a certain company has 100,000 outstanding shares and you buy 1,000 of them, you will have a 1% ownership interest in the company.

2 Types of Shares:

Common stock - refers to most of the stocks that are traded on the major exchanges, and the price and dividends paid can fluctuate over time. A share of stock entitles the owner to a portion of the company's success or failure, and also entitles them to vote for the company's board of directors, but does not come with any operational control of the business.

Preferred stock - represents an equity interest that pays a set dividend amount quarterly. Because of this, the price of preferred stock is tied to the dividend amount and the company's financial strength or credit rating, not the profitability of the business.

How can an equity holder not be a shareholder? Some businesses don't have "shares." A sole proprietorship, for instance, has just one owner, who owns a 100% equity stake (but no shares). A partnership is an arrangement under which two or more investors each own an equity stake in the business, but there is no stock and therefore no shareholders.

To sum it up, all shareholders are equity holders, but not all equity holders are shareholders. It is possible to have an ownership interest in a business that does not issue shares of stock. In general parlance, people do use equity and shares interchangeably.

Equity investments are the primary investments that boost the entity in raising the money and give investors appreciation in their investment values gradually.

While share investments are done by the trader at the stock market. Their main aim is to speculated and to earn the short term price gain. Equity components involve the shares, stocks, reserves, and own funds hence it is much broader term while shares are part of equity and hence it is the part of the same.

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