How to Sell Stock in a Private Company: 4 Steps for Employees

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

A sale of shares in a private company almost always needs the company’s permission, because your stock agreement and the company’s bylaws usually give it a right of first refusal and often require its consent to any transfer. For employees, the realistic routes are a company-run tender offer, a company-approved secondary sale to an outside investor, a buyback by the company, or waiting for an IPO or acquisition. Before you commit, work out the after-tax number: in California a long-term gain is taxed as ordinary income by the state, so a large sale can cost 35% or more of the gain once federal tax and the 3.8% Net Investment Income Tax are added.

This guide is for W-2 families in California and Washington who hold stock or options in a late-stage private employer and earn $750,000 or more. It walks through four steps, a worked example for the same sale in the Bay Area and in Seattle, and the decisions that matter most at this income level.

Step 1: Identify exactly what you own and its tax basis

“Private company stock” can mean four different things, and each one has a different sale path and tax result. Pull your grant agreements, exercise confirmations and the equity portal statement (Carta, Shareworks or similar) before anything else.

Your basis is what you paid plus any amount already taxed as income (for example, the NSO spread you reported at exercise). The rules are in IRS Publication 525. If you early-exercised and filed an 83(b) election (it must be filed within 30 days of the transfer), your holding period started at exercise, which often means the shares are already long-term. For RSUs at a pre-IPO employer, see our guide to RSUs at private companies.

Step 2: Read the transfer restrictions before you talk to any buyer

Most late-stage companies restrict sales tightly. The documents that decide what you can do are the stock purchase or option exercise agreement, the company bylaws, and any shareholder or insider trading policy. Look for:

• Right of first refusal (ROFR). The company, and sometimes its investors, can match any price you agree with an outside buyer.
• Board or company consent. Many companies must approve every transfer and some approve none outside a tender.
• Blanket bans on forward contracts and pledges. Structures that promise future shares to a buyer are often prohibited and can cost you the shares.
• Securities rules. Private company shares are generally restricted securities. The SEC’s Rule 144 overview explains resale holding periods, at least one year for companies that do not file reports with the SEC. Secondary platforms generally limit buyers to accredited investors.

If the documents are unclear, ask the company’s stock administration team in writing what transfers it permits. The answer decides your route.

Step 3: Choose the route that the company will actually allow

1. Tender offer. The company or a group of investors offers to buy a set amount of stock from employees at one price, during a fixed window. It is usually the cleanest route: the company runs the paperwork and typically waives its ROFR for the tender. Caps per employee are common. Our tender offer guide covers the mechanics.
2. Company-approved secondary sale. You find a buyer through a secondary platform or broker-dealer, agree a price, and the company then decides whether to approve, exercise its ROFR or block the sale. Expect weeks to months, legal fees, and often a price discount to the latest preferred round, since you are selling common stock.
3. Company buyback. Some companies repurchase shares directly, often from departing employees. When the company pays more than the stock’s fair market value, part of the payment can be treated as compensation rather than capital gain. Ask how the company will report it before you sign.
4. Wait for an IPO or acquisition. No sale costs now, but you carry the concentration risk and the lockup that usually follows an IPO. See what happens to your stock if the company is sold.

Step 4: Run the after-tax math, California versus Washington

The same sale lands very differently depending on where you live on the day of the sale. Federal rules for 2026: long-term gains are taxed at 20% for joint filers with taxable income above $613,700, and the 3.8% Net Investment Income Tax applies to the lesser of net investment income or modified AGI above $250,000 for joint filers (Rev. Proc. 2025-32, IRS NIIT page). California has no lower rate for capital gains (FTB). Washington has no wage income tax in 2026 but taxes long-term capital gains at 7% above a standard deduction of $278,000 (2025 figure; 2026 not yet published), and 9.9% on taxable gains above $1,000,000 (WA DOR).

Worked example: a $520,000 tender sale

Assumptions (illustrative): a married couple filing jointly with $900,000 of W-2 wages and $50,000 of deductions, so $850,000 of ordinary taxable income before the sale. One spouse early-exercised 20,000 common shares at $2 three years ago and filed an 83(b). In a 2026 tender at $52 per share, they sell 10,000 shares: proceeds $520,000, basis $20,000, long-term gain $500,000. California figures use the 2025 rate schedule, the latest published.

Three details change the answer for real families. First, if the shares had been held one year or less, the federal rate on the gain would be 37% instead of 20%. Second, if the company qualifies for the Qualified Small Business Stock exclusion, shares acquired on or before July 4, 2025 must be held more than five years for the federal exclusion, so this family would be about two years short; waiting could remove most of the federal tax. California does not follow the federal QSBS rules, so the state tax stays. Third, Washington families should plan for the new 9.9% income tax on AGI above $1,000,000 that takes effect January 1, 2028 (WA DOR); how it interacts with the capital gains tax is still pending guidance.

If you exercise NSOs and sell in the same tender

Say the same employee also holds 5,000 NSOs with a $10 strike and exercises them into the $52 tender. The $210,000 spread is W-2 wages. The employer typically withholds 22% federal on supplemental wages ($46,200), but at a 37% marginal rate the federal tax is $77,700, leaving a $31,500 gap (IRS Publication 15). Add Medicare tax, the 0.9% Additional Medicare Tax, California income tax at the marginal rate and 1.3% California SDI with no wage cap ($2,730). Families in this position typically set cash aside or make an estimated payment for the quarter of the sale. Our cashless exercise guide covers this in more detail.

How much to sell: the decision that matters more than the price

Families at this level rarely lose money by getting a tender price slightly wrong. They lose it by keeping most of their net worth in one private company whose value they cannot see daily. A short checklist before each liquidity window:

• What share of our net worth is in this one company, including unvested grants? If one employer pays both the salary and holds most of the savings, a bad year hits twice.
• What concrete goals would this cash fund: a home down payment in a high-cost market, a year of reserves, 529 funding for the kids, paying off the ISO-related AMT from a prior year?
• Would we buy this stock today, at this price, with cash? If not, selling some is consistent.
• Is there a tax reason to wait (the one-year long-term date, a QSBS date) that is worth the risk of the window closing?

Many families settle on a rule, such as selling a fixed share at every tender until the position is below a target percentage of net worth. Writing the rule down before the window opens makes the decision faster when it arrives. Our investment risk management and tax management services work through this for each window.

Common mistakes with private company share sales

• Signing with a secondary buyer before checking ROFR and consent. The company can block or match the deal, and some agreements treat an unapproved transfer as void.
• Using the wrong basis. Forgetting to add the NSO spread already taxed at exercise means paying tax twice on the same income.
• Relying on withholding. The 22% federal withholding on NSO spread or RSU delivery is not the tax owed at a 35% to 37% bracket.
• Selling ISO shares early by accident. A sale inside the two-year or one-year windows turns the spread into ordinary income.
• Moving states around the sale without advice. California can tax stock option income tied to work performed in the state even after you move (FTB Publication 1100), and residency changes are examined closely.

What to write down for the kids

A liquidity event is one of the few times a family makes a large, visible money decision. Children under 12 will not follow the tax math, but the reasoning is worth recording for them later: why you sold part and kept part, what the money was for, and what you would do differently. A one-page decision memo in your family governance records turns a stressful week into something the next generation can learn from. Pass down your knowledge, not your money.

Frequently asked questions

Can I sell private company stock before an IPO?

Often yes, but only in the ways your company allows. Many late-stage companies limit employee sales to company-run tender offers. Others approve individual secondary sales subject to their right of first refusal. Check your stock agreement and bylaws, then confirm in writing with stock administration. Unvested RSUs and unexercised options cannot be sold directly.

Do I need a broker to sell private company shares?

In a tender offer, no; the company and its agent handle the transaction. For a secondary sale to an outside investor, sellers usually work through a registered broker-dealer or a secondary platform that finds accredited buyers and handles the transfer paperwork. Expect fees and a discount to the latest funding round, and budget for your own legal review.

Can a private company sell shares to the public?

Only through an SEC-registered offering, such as an IPO, or under an exemption from registration. Exemptions such as Regulation A and Regulation Crowdfunding allow limited public sales, and most private rounds use exemptions limited to accredited investors (SEC exempt offerings). None of these change the transfer restrictions on shares you already hold as an employee.

Your next step

Before the next tender window, gather your grant agreements, exercise records and 83(b) filings, and list your basis and acquisition date for every lot. That one page answers most of the questions above. If you would like a second set of eyes on the after-tax numbers and how much to sell, the Tax & Wealth Assessment from Age Five Family Office™ starts there.

This is general education, and the right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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