To buy equity in a company, you purchase shares of stock in a corporation or units in another business entity. For a publicly traded company, you open a brokerage account and place an order through an exchange. For a private company, you invest through an SEC-regulated crowdfunding portal, a private placement, a Regulation A+ offering, or an employer equity program. Which private routes are open to you depends on your income and net worth.
Check Whether You Qualify as an Accredited Investor
Anyone can buy shares of a publicly traded company. Private-company investments are often limited based on your financial profile, so this is the first thing to sort out.
You are an accredited investor if you meet at least one of several SEC benchmarks. The common paths for individuals are earning more than $200,000 per year ($300,000 with a spouse or partner) for the two most recent years with the expectation of maintaining that income, or having a net worth above $1 million excluding your primary residence.1U.S. Securities and Exchange Commission. Accredited Investors Holding certain professional certifications, such as a Series 7 or Series 65 license, also qualifies you regardless of income or net worth.2eCFR. 17 CFR 230.501 – Definitions and Terms Used in Regulation D
If you fall short, you are a non-accredited investor. You can still buy publicly traded stock without restriction and participate in Regulation Crowdfunding and some Regulation A+ offerings, but the dollar amounts you can put into private deals may be capped.
Buying Shares of a Public Company
Before you can buy anything, you need a funded brokerage account. Every brokerage will ask for a Social Security number or Individual Taxpayer Identification Number,3Internal Revenue Service. U.S. Taxpayer Identification Number Requirement government-issued photo ID, your current address, employment information, and basic details about your investment goals and risk tolerance. Brokers collect this information under FINRA’s Know Your Customer rule, which requires them to understand essential facts about each customer before opening an account.4FINRA. FINRA Rule 2090 – Know Your Customer
Once the application is approved, you link a bank account using your routing and account numbers. Most brokerages verify the link through small test deposits or a third-party authentication service. Fund the account before you pick a stock. Prices move, and waiting for a transfer to clear while the price changes can cost you.
With cash in the account, buying is a short sequence: search for the company’s ticker symbol, decide how many shares you want, choose an order type, and submit. The two order types you will use most often are:
- A market order executes immediately at the best available price. You get filled quickly, but the exact price may shift slightly between the moment you click and the moment the order fills.
- A limit order lets you set the maximum price you are willing to pay. It only executes if the stock reaches your price or lower, which gives you price control but means the order may not fill at all.
The platform will show a review screen with the estimated total cost. After you confirm, the order is routed to an exchange to be matched with a seller. Once filled, you receive a trade confirmation showing the execution price, number of shares, settlement date, and any fees.5U.S. Securities and Exchange Commission. Confirmation Requirements for Transactions of Security Futures Products Effected in Futures Accounts
U.S. equity trades settle on a T+1 basis, meaning one business day after the trade date.6U.S. Securities and Exchange Commission. SEC Chair Gensler Statement on Upcoming Implementation of T+1 After settlement, your shares are held in “street name” by the brokerage on your behalf. You own them; the broker is listed as the registered holder for administrative convenience.
Buying Equity in a Private Company
Private companies do not trade on stock exchanges. Federal securities law provides several exemptions that let them sell shares without a full public registration, and each exemption has its own rules about who can invest and how much.
Regulation Crowdfunding
Regulation Crowdfunding lets companies raise up to $5 million in a rolling 12-month period from both accredited and non-accredited investors.7U.S. Securities and Exchange Commission. Regulation Crowdfunding – Compliance and Disclosure Interpretations Transactions happen through SEC-registered online funding portals. Each company posts a Form C disclosure that includes financial statements, ownership structure, and how it plans to use the money.8eCFR. 17 CFR Part 227 – Regulation Crowdfunding, General Rules and Regulations
Non-accredited investors face annual caps across all Regulation Crowdfunding offerings combined. If either your annual income or net worth is below $124,000, you can invest the greater of $2,500 or 5 percent of the larger of those two figures. If both your income and net worth are at least $124,000, you can invest up to 10 percent of the larger figure, capped at $124,000 in any 12-month period.9U.S. Securities and Exchange Commission. Regulation Crowdfunding – Guidance for Issuers Accredited investors have no cap under this exemption.
To invest, you open an account on the funding portal, review the offering materials, enter the dollar amount you want to commit, and electronically sign a subscription agreement, which is the contract between you and the company issuing the shares.8eCFR. 17 CFR Part 227 – Regulation Crowdfunding, General Rules and Regulations The company’s transfer agent updates its records to reflect your ownership once the offering closes.
Regulation D Private Placements
Regulation D is the most common exemption used by startups and private companies raising larger amounts. Two variations dominate.
Under Rule 506(b), the company can raise an unlimited amount but cannot publicly advertise the offering. Up to 35 non-accredited investors can participate, but each must be financially sophisticated enough to evaluate the risks. Accredited investors face no cap.10U.S. Securities and Exchange Commission. Private Placements – Rule 506(b) Under Rule 506(c), the company can advertise and solicit investors publicly, but every buyer must be a verified accredited investor. Non-accredited investors cannot participate at all.
In a typical Regulation D deal, you receive a private placement memorandum describing the business, financials, and risks. You sign a subscription agreement, provide proof of accredited status if required, and wire your investment directly to the company or an escrow account.
Regulation A+ Offerings
Regulation A+ functions as a “mini-IPO” that lets companies raise significant capital while staying open to non-accredited investors. Tier 1 covers offerings up to $20 million in a 12-month period, with no individual investment limits. Tier 2 covers offerings up to $75 million in a 12-month period; non-accredited investors may invest up to 10 percent of the greater of their annual income or net worth.11U.S. Securities and Exchange Commission. Regulation A
Regulation A+ offerings are typically listed on online investment platforms, and buying in resembles buying stock through a brokerage. You browse offerings, review the company’s SEC-qualified disclosure, and place your investment.
Getting Equity Through Your Employer
Many companies offer equity as part of compensation. The two most common vehicles are employee stock purchase plans and stock options. Both give you a path to ownership that does not involve the open market.
Employee Stock Purchase Plans
An ESPP lets you buy company stock at a discount through payroll deductions. During an open enrollment window, you elect a dollar amount or percentage of your after-tax pay to set aside. The company accumulates those contributions over an offering period, often six months, and then buys shares on your behalf at a discounted price.
Under a tax-qualified plan, the maximum discount is 15 percent of the stock’s fair market value: the purchase price cannot be less than 85 percent of the value at the grant date or the purchase date, whichever is lower. Total purchases across all of your employer’s plans cannot exceed $25,000 in fair market value of stock, measured at grant, per calendar year.12Internal Revenue Service. Internal Revenue Bulletin 2009-49 – Section 423 Regulations
Stock Options
Stock options give you the right to buy a set number of shares at a fixed strike price after a vesting period. Companies primarily grant two types. Incentive stock options (ISOs) are available only to employees, and if you meet certain holding-period requirements, the profit when you eventually sell is taxed at the lower long-term capital gains rate rather than as ordinary income.13Office of the Law Revision Counsel. 26 USC 422 – Incentive Stock Options Non-qualified stock options (NSOs) can be granted to employees, contractors, or advisors; the difference between the strike price and the market price at exercise is taxed as ordinary income.
To participate, you sign a grant agreement, usually through a third-party equity management portal. The agreement specifies how many options you receive, the strike price, and the vesting schedule. Once options vest, you exercise them by paying the strike price, and the shares land in a linked brokerage account.
Before You Sell: Limits on Reselling Private Shares
Shares purchased in private offerings are generally “restricted securities,” and you cannot resell them the way you would sell public stock. Under SEC Rule 144, you must hold restricted shares from a company that files regular reports with the SEC for at least six months before reselling. If the company does not file those reports, which is the case for most private companies, the minimum holding period is one year.14eCFR. 17 CFR 230.144 – Persons Deemed Not to Be Engaged in a Distribution
Beyond the SEC holding period, the company’s own governing documents may impose more restrictions. Private company bylaws and shareholder agreements commonly include rights of first refusal (requiring you to offer shares back to the company or existing shareholders before selling to an outsider), outright lock-up periods, or board-approval requirements for any transfer. Read these before you invest. They can make it very difficult to turn your equity back into cash on your schedule. Secondary market platforms exist for pre-IPO shares in well-known companies, but they cover a small fraction of private businesses and often charge significant fees.
Taxes You Should Plan For
Owning equity creates several tax obligations that catch new investors off guard. Sorting them out before you buy helps you avoid a surprise bill.
Capital Gains When You Sell
When you sell stock for more than you paid, the profit is a capital gain. Hold the shares for more than one year and the gain is long-term, taxed at a preferential rate.15Office of the Law Revision Counsel. 26 USC 1222 – Other Terms Relating to Capital Gains and Losses Sell within a year and the gain is short-term, taxed at your regular income tax rate.
For 2026, the long-term capital gains brackets for single filers are 0 percent on taxable income up to $49,450, 15 percent from $49,451 to $545,500, and 20 percent above $545,500. For married couples filing jointly, the 0 percent rate applies up to $98,900, 15 percent up to $613,700, and 20 percent above that.16Internal Revenue Service. Revenue Procedure 2025-32 – 2026 Adjusted Items
ISO Holding Periods and the AMT
Incentive stock options receive their favorable tax treatment only if you hold the shares for at least two years from the grant date and one year from the exercise date. Selling before you meet both periods triggers a disqualifying disposition, and the profit is taxed as ordinary income.13Office of the Law Revision Counsel. 26 USC 422 – Incentive Stock Options
Even if you hold long enough, exercising ISOs can trigger the alternative minimum tax. The spread between the strike price and the fair market value at exercise counts as AMT income in the year you exercise. For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly, phasing out at $500,000 and $1,000,000 respectively.17Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Run the numbers before exercising a large batch of ISOs.
Section 83(b) Elections for Restricted Stock
If you receive restricted stock that vests over time, common for startup founders and early employees, you can file a Section 83(b) election to pay tax on the stock’s value at the time of the grant rather than at vesting. This can save substantial money if the stock appreciates between grant and vesting, because you lock in a lower taxable amount.18Office of the Law Revision Counsel. 26 USC 83 – Property Transferred in Connection with Performance of Services
The deadline is 30 days from the date the stock is transferred to you. Miss it and the election is permanently unavailable for that grant. No extensions, no exceptions.19Internal Revenue Service. Form 15620 – Section 83(b) Election The risk is that if you file the election and later forfeit the stock by leaving before vesting, you cannot recover the tax you already paid.
The Wash Sale Rule
If you sell stock at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the IRS disallows the loss deduction under the wash sale rule.20Office of the Law Revision Counsel. 26 USC 1091 – Loss from Wash Sales of Stock or Securities The disallowed loss is added to the cost basis of the replacement shares, so it is not gone forever, but you cannot use it to offset gains in the current tax year.
Risks Worth Pricing In
Equity offers the potential for significant returns, but it carries risks that bonds do not.
Stock prices fluctuate based on company performance, economic conditions, and investor sentiment. Nothing guarantees that an equity investment will hold its value. With public stock you see this in real time; with private equity, you may not learn about a decline until the company circulates updated financials or attempts a new funding round at a lower valuation.
Dilution is the other constant. When a company issues new shares to raise capital, compensate employees, or acquire another business, your ownership percentage shrinks. If you own 1 percent of a company with 10 million shares outstanding and it issues 2 million new shares, your stake drops to roughly 0.83 percent. Private companies tend to raise across multiple rounds, so early investors can see meaningful dilution over time if they do not participate in later rounds.
In private companies, liquidation preferences add another layer. Investors who buy preferred stock, typically venture capital firms, often negotiate the right to be paid first if the company is sold or wound down. If the sale price does not exceed the total amount preferred shareholders invested, common shareholders, including employees and crowdfunding investors, may receive nothing. Ask about the company’s capital structure and existing preferences before you invest, so you know what a realistic payout looks like at various exit valuations.
And illiquidity is the practical reality behind all of the above for private deals. Between SEC holding periods, company-imposed transfer restrictions, and the lack of a ready market of buyers, treat private equity as money you will not need for years.