To sell shares of a private company, you need to clear the transfer restrictions in your company’s governing documents, agree on a price backed by a defensible valuation, fit the transaction within a federal securities exemption, sign a stock purchase agreement and stock power, get the board to approve the transfer, and then plan for capital gains tax on the profit. There is no open market and no posted price, so every step happens by contract and by company record rather than through a broker.
Check What Your Company Documents Allow
Before you talk to a buyer or agree on a number, pull your Certificate of Incorporation, Bylaws, and any shareholder agreements you signed. These control whether you can sell, who you can sell to, and what you have to do first. Deals collapse three weeks in when someone skips this step.
The clause that trips up most sellers is a Right of First Refusal. A ROFR lets the company or existing shareholders buy your shares at the same price and terms you negotiated with an outside buyer. You usually have to send written notice of your intended sale and wait a set window, often 30 days, before you can close with the outsider.1SEC.gov. Bylaws of GZI Hub, Inc. – Article XIV Right of First Refusal If the company passes, you proceed. If it exercises, you sell to the company instead.
Two other clauses matter. Tag-along rights let minority holders join a large shareholder’s sale on the same terms. Drag-along rights let a majority shareholder force you to sell into a company-wide exit. Check which ones bind you before you market your shares.
Ask the company secretary for the current capitalization table. Confirm your shares are fully vested and that no pledge or other claim is attached. If you’re on a vesting schedule, only the vested portion is yours to sell.
Get a Defensible Valuation
Private shares don’t have a market price. Buyers and sellers usually anchor to a 409A valuation, an independent appraisal of the company’s fair market value done by a qualified third party. Costs run from a few thousand dollars for a simple early-stage startup to $10,000 or more for companies with complex capital structures.
A 409A is generally treated as valid for about 12 months, unless a new funding round, acquisition offer, or material change in the business happens sooner. If something material happens, the company needs a fresh valuation before share transactions can rely on the old number.
Getting the number right protects you. If the IRS later determines shares were priced below fair market value in connection with deferred compensation, the recipient owes regular income tax on the full amount plus an additional 20% penalty tax, plus interest at the federal underpayment rate plus one percentage point, running back to the year the compensation was first deferred.2Office of the Law Revision Counsel. 26 USC 409A – Inclusion in Gross Income of Deferred Compensation Under Nonqualified Deferred Compensation Plans
Fit the Sale Within Securities Law
Your shares are unregistered securities. You cannot sell them the way you would sell stock on an exchange. Every sale must fit a federal exemption from Securities Act registration, and most private resales use one of two.
Federal Exemptions
Section 4(a)(1) exempts “transactions by any person other than an issuer, underwriter, or dealer.”3Office of the Law Revision Counsel. 15 USC 77d – Exempted Transactions A negotiated sale from you, an ordinary shareholder, to one buyer or a small group fits comfortably here as long as you don’t advertise the sale.
Section 4(a)(7) is a more structured alternative for private resales of restricted securities to accredited investors. Every buyer must qualify as accredited, no general solicitation is allowed, and the company’s basic information (name, address, financials, outstanding share count) must be made available to the buyer.3Office of the Law Revision Counsel. 15 USC 77d – Exempted Transactions Buyer’s counsel often prefers 4(a)(7) because it gives a specific statutory basis for the transaction.
Rule 144 Holding Period
If you got your shares through an option exercise, a grant, or a private purchase, they are restricted securities and SEC Rule 144 imposes a minimum holding period before resale. For shares of an SEC-reporting company, that is six months. For non-reporting companies, which covers most private startups, it is one full year from the date you acquired the shares and paid for them in full.4eCFR. 17 CFR 230.144 – Persons Deemed Not to Be Engaged in a Distribution and Therefore Not Underwriters
Affiliates (directors, officers, and controlling persons) face volume limits even after the holding period ends. In any three-month window, an affiliate can sell no more than the greater of 1% of the outstanding shares of the class, or the average weekly trading volume over the prior four weeks if the shares are listed.5U.S. Securities and Exchange Commission. Rule 144 – Selling Restricted and Control Securities For unlisted private shares, only the 1% cap applies.
State Blue Sky Filings
A federal exemption does not clear you at the state level. Most states require at least a notice filing for private placements, and fees and timelines vary. Regulation D Rule 506 offerings are preempted from state merit review, but you still generally file a Form D with the states involved. A securities attorney in the buyer’s state can confirm what is needed.
Find a Qualified Buyer
Internal Buyers
The fastest deals happen inside the company. The company may offer a buyback and retire the shares. Co-founders, executives, or existing investors often want to increase their stakes and will negotiate directly. Internal buyers already know the numbers, so due diligence is short. Your ROFR clause may push the sale this way anyway.
Secondary Market Platforms
When no internal buyer appears, platforms such as Forge Global and EquityZen match sellers with institutional buyers and high-net-worth individuals. They handle much of the compliance paperwork and charge for it. Forge, for example, charges a success-based commission typically between 2% and 4% of the transaction value, with the exact fee depending on deal size, market conditions, and the seller’s relationship with the platform.6Forge. Forge Fees Explained
The Accredited Investor Test
Whether you find a buyer yourself or use a platform, that buyer will almost always need to be accredited. The SEC defines an accredited investor as someone with net worth over $1 million (excluding primary residence), individual income over $200,000 in each of the two most recent years, or joint income with a spouse over $300,000, with a reasonable expectation of continuing.7U.S. Securities and Exchange Commission. Accredited Investors Holders of certain professional licenses, including the Series 7, Series 65, and Series 82, also qualify regardless of income or net worth.8U.S. Securities and Exchange Commission. Final Rule – Amending the Accredited Investor Definition
Sign the Right Documents
A private share sale generates a stack of paperwork. Getting the documents right protects both sides and keeps the company from refusing to record the transfer.
The Stock Purchase Agreement is the main contract. It sets the number of shares, price per share, total price, and closing date, and it carries representations and warranties from both sides. As seller, you confirm you hold clear title and have authority to sell. Have counsel draft or review it.
The Stock Power is a shorter document that authorizes the transfer on the company’s books. It identifies the exact share count, certificate number if there is one, and class of stock. Transfer agents require a Medallion Signature Guarantee on this form, a specialized stamp from a participating financial institution that verifies your identity. A regular notary stamp is not the same thing and will be rejected.9Investor.gov. Medallion Signature Guarantees – Preventing the Unauthorized Transfer of Securities
Disclosure Schedules attach to the SPA and list specific exceptions to your representations: a pending lawsuit, a lien on the shares, anything that qualifies an otherwise clean statement. And if you live in a community property state, expect a spousal consent form. Community property laws can give your spouse an interest in shares acquired during the marriage, and without a signed consent the transfer may not be enforceable.
Close and Record the Transfer
Most companies require their Board of Directors to formally approve the transfer, either at a meeting or by written consent. The board confirms the sale complies with the bylaws, shareholder agreements, and any ROFR provisions. The company secretary may issue a certificate verifying the corporate records and the authority of the signers.
For larger deals or when the parties don’t fully trust each other, an escrow agent holds both the funds and the transfer documents until closing conditions are met. The escrow agreement spells out what triggers release and what happens if either side fails to perform. This is common when the SPA includes post-closing adjustments or indemnification holdbacks.
Once the board approves and funds clear, the company secretary cancels your original certificate (or updates the book-entry record) and issues a new certificate or entry in the buyer’s name. The cap table is updated with the new ownership and the transfer date. Ask for a copy of the updated cap table or a confirmation letter. That is your proof the sale is done and your obligations as a shareholder have ended.
Plan for the Tax Bill
A private share sale is a capital gains event. Running the numbers before you close can protect you from a surprise, and in some cases can eliminate the federal tax entirely.
Capital Gains Rates
Hold the shares more than one year and the profit is a long-term capital gain, taxed for 2026 at 0%, 15%, or 20% depending on taxable income. Single filers pay 0% up to $49,450, 15% up to $545,500, and 20% above that. Joint filers hit 15% at $98,900 and 20% at $613,700. Hold one year or less and the gain is ordinary income at your regular rate, which can be considerably higher.10Internal Revenue Service. Instructions for Form 8949
High earners also owe the 3.8% Net Investment Income Tax on the lesser of net investment income or the amount by which modified adjusted gross income exceeds $200,000 for single filers ($250,000 for joint filers).11Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax Stacked on the 20% long-term rate, that brings the top federal rate to 23.8%.
Qualified Small Business Stock
Section 1202 can wipe out federal tax on the sale if your shares qualify as Qualified Small Business Stock. The shares must have been issued by a domestic C corporation with aggregate gross assets of $50 million or less at the time of issuance, and you must have acquired them at original issuance in exchange for money, property, or services.12Office of the Law Revision Counsel. 26 USC 1202 – Partial Exclusion for Gain From Certain Small Business Stock
The exclusion scales with holding period: 50% at three years, 75% at four years, and 100% at five years or more.12Office of the Law Revision Counsel. 26 USC 1202 – Partial Exclusion for Gain From Certain Small Business Stock The maximum excludable gain per issuer is the greater of $10 million or 10 times your adjusted basis. If you have held qualifying shares for five years, the difference between a taxable and a tax-free sale is often enough to change whether selling now makes sense at all. Verify eligibility before you close.
Reporting
Report the sale on IRS Form 8949 and carry the totals to Schedule D. Private stock sales usually don’t generate a Form 1099-B, so you’ll report in Part I with box C checked (short-term) or Part II with box F checked (long-term).10Internal Revenue Service. Instructions for Form 8949 You’ll need the acquisition date, sale date, cost basis (what you paid, including any option exercise price), and proceeds. Keep your Stock Purchase Agreement and any valuation reports on file. Those are the records you would need if the IRS questions your basis or sale price.