How to Sell Shares of Your Company

To sell shares in a private company, first check whether you're allowed to sell at all. Shareholder agreements, bylaws, operating agreements, and option agreements often restrict transfers, require board approval, or give existing shareholders the right to buy before an outsider can. If you're clear, decide how much of your stake goes and which share class it is, price it using a market-, income-, or asset-based valuation, and vet the buyer's funds before agreeing terms. Document the sale in a stock purchase agreement, then update the share register, cap table, and certificates once it closes. Factor tax into the price too: shares held over a year usually qualify for lower long-term capital gains rates, and shares from stock options can add ordinary income or AMT.

When it comes to a company selling shares, the process largely depends on your business structure and the type of ownership interest you hold.  

For corporations, ownership is divided into shares that can generally be transferred to another person. LLCs work differently because owners hold membership interests instead of shares, and transfer rules are often more restrictive. Partnerships have their own structure as well — ownership is based on partnership interests, and selling them commonly requires approval from the other partners.

The most common people who sell shares include:

Unlike publicly traded businesses listed on exchanges like the NASDAQ, most private company share sales happen directly between the seller and the buyer, often with the involvement of lawyers, advisors, and, of course, a stock purchase agreement that confirms the terms of the deal and officially documents the transfer of ownership. 

Typical buyers in private share sales include existing shareholders, co-founders, employees with equity, outside investors, competitors, or strategic partners looking to gain involvement in the business. 

Depending on how much ownership is being transferred, additional legal obligations may also apply. For example, anyone owning more than 10% of company shares may be considered an “insider” under U.S. securities rules and could have reporting obligations with the U.S. Securities and Exchange Commission. 

Before discussing how do you sell stocks, check whether you are actually allowed to sell the shares.

Many private companies restrict ownership transfers to protect the business and existing shareholders.

Start by reviewing:

Selling shares in a company without following rules can create serious legal and financial problems. In some cases, the transaction may even be challenged or blocked entirely. For example, existing shareholders may have priority rights to buy the shares first, or the company may require board approval before the transfer can happen.

Since these agreements are often long and written in complex legal language, many business owners now use AI-powered document summaries to review them faster. An AI summary tool can help identify key transfer restrictions, approval requirements, ownership rights, and unusual clauses before you move forward with the sale.

Whether you review the agreements manually or use the tool, there are several important clauses you should understand before trying to sell your shares.

If you are trying to understand how to sell stocks in a private company, start by deciding how much ownership you actually want to transfer. In most cases, sellers choose between partial and full share sales. 

Once you decide whether you are selling a partial or full stake, the next step is understanding the type of shares you own because not all shares have the same rights or value. 

Unlike public companies, private businesses usually do not have a public market price. In most cases, buying and selling ownership shares of companies involves negotiating the share value using several valuation methods. 

This method estimates your company’s value by comparing it to similar businesses that were recently sold, invested in, or valued in the market.

For example, if a software startup similar to yours recently raised investment at a $10 million valuation, investors may use that deal as a reference point when evaluating your company. The same approach is often used for small businesses, where buyers compare revenue, industry, size, and growth to similar companies that were recently sold.

Market-based valuation is especially common in startup fundraising and investor negotiations because it reflects what buyers are currently willing to pay in the market.

An income-based approach values a company based on how much money the business currently makes and how much it is expected to generate in the future. It is commonly used for operating businesses with stable and predictable income.

Buyers usually evaluate:

If a company consistently earns strong yearly profits and shows steady growth, buyers may value the shares higher because the business is expected to continue generating income. 

This method calculates a company’s value based on what the business owns. Instead of focusing mainly on revenue or future growth, buyers look at the total value of the company’s assets minus its liabilities. 

Buyers may evaluate assets such as:

For example, if a manufacturing company owns expensive machinery, warehouses, and a large inventory, those assets may significantly increase the company’s valuation even if profits are lower than in a fast-growing startup. This method is commonly used for asset-heavy businesses like manufacturing, construction, transportation, or real estate companies.

Finding the right buyer matters because the new shareholder may influence future business decisions, company operations, and long-term strategy. Buyers can be found both inside and outside the company, depending on the type of transaction and your goals.

Before agreeing to the deal, evaluate the buyer’s financial capacity, source of funds, long-term business goals, and overall strategic fit with the company. This becomes a strategic move if you plan to remain a shareholder after the sale and continue working alongside the new owner.

Secondary transactions have become more common in startups and growing private companies where founders, employees, or early investors want liquidity before an IPO or acquisition. Instead of searching for buyers independently, shareholders can work through structured secondary marketplaces that help manage investor screening, pricing discussions, compliance checks, and transaction coordination.

Private company shareholders use secondary markets to help find qualified buyers. These platforms connect existing shareholders with accredited investors who are interested in purchasing private company stock. Examples of U.S. secondary marketplaces include Forge Global, EquityZen, and Hiive, which help facilitate private share transactions between sellers and investors. 

However, secondary sales still usually require company approval and must comply with shareholder agreements, securities laws, and transfer restrictions. Some companies actively support secondary transactions, while others limit or tightly control them to manage ownership structure and investor relationships.

If both sides are interested, negotiations move into formal documentation. The documents used during the deal help define the terms, protect confidential information, and officially transfer ownership.

These legal documents include:

An NDA is often signed early in the process because buyers usually need access to sensitive financial, operational, or legal information before deciding whether to move forward with the deal.

In the United States, profits from selling shares are usually taxed as capital gains under IRS rules. The amount of tax you may owe often depends on:

One of the biggest differences is between short-term and long-term capital gains. If you owned the shares for one year or less before selling them, profits are usually taxed at ordinary income tax rates, which are often higher. Shares held for more than one year generally qualify for lower long-term capital gains tax rates.

Employee stock options may create additional taxes beyond capital gains. Depending on the type of option, sellers may face ordinary income tax, payroll taxes, or alternative minimum tax (AMT) obligations when exercising or selling the shares.

Some startup founders and early investors may also qualify for special tax treatment under Section 1202 of the IRC, often called Qualified Small Business Stock (QSBS) rules. In certain situations, this can allow part of the gain from selling startup shares to be excluded from federal taxes if specific holding periods and company requirements are met.

Because tax rules vary significantly by state, ownership structure, and share type, many sellers work with accountants or tax advisors before finalizing the transaction.

After the transaction closes, the company usually needs several administrative and legal updates. The ownership change must be officially reflected in the company’s internal records to avoid future confusion or disputes.

This process may include updating shareholder records, issuing revised stock certificates, updating capitalization tables, recording board approvals, notifying investors, and revising internal company documents. In some businesses, additional filings or notifications may also be required depending on state laws or investor agreements. PDF editing tools are often used during this stage to update and organize transaction documents more efficiently.

Keeping ownership records accurate is important because future investors, lenders, buyers, and auditors often review company history during financing rounds, acquisitions, or legal reviews. A properly documented share transfer helps avoid compliance issues, ownership disputes, and confusion about shareholder rights later on.