Can You Sell Shares in a Private Company? Routes, Rules and Tax

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

Yes, you can usually sell shares in a private company, but almost never on your own terms or timeline. Your stock agreement and the company’s bylaws typically require the company’s approval, give the company a right of first refusal, and limit who can buy. In practice, most employees sell in one of three ways: a company-run tender offer, a company-approved secondary sale to an outside buyer, or a sale when the company is acquired or goes public.

For a family earning $750,000 or more in California or Washington, where one parent holds a meaningful stake in a late-stage startup, the harder question is not “can I sell” but “how much should we sell when the window opens, and what will it cost in tax.” This guide covers the rules that decide whether you can sell, the routes that actually exist, and a worked example of what a $200,000 sale nets in each state.

What stops you from selling private company stock freely

Public shares trade on an exchange. Private shares do not, and the company controls who owns its stock. Four documents usually decide what you can do:

• Your stock option or stock purchase agreement. Most include transfer restrictions and a right of first refusal (ROFR): before you sell to anyone, the company (and sometimes existing investors) can buy the shares at the same price.
• The bylaws. Many venture-backed companies amended their bylaws to require board approval for any transfer, or to ban transfers outside approved programs.
• Your equity plan. It defines what happens to unvested shares if you leave, and any repurchase right the company keeps.
• Securities law. Private shares are generally “restricted securities.” A resale has to fit an exemption from SEC registration, which is why many buyers and platforms only deal with accredited investors.

Read these before you talk to any buyer. A deal that skips the ROFR or board approval can be void, and some companies treat an unapproved transfer as a breach that affects future grants.

The four realistic ways to sell private shares

If your company runs a tender, our guides to how a tender offer works and what a cash tender offer is walk through the mechanics. If the company is being bought, see what happens to your stock when a company sells.

What you can sell depends on what you hold

Exercised options or purchased shares. These are shares you own outright. They are the shares a tender offer or secondary sale is built for.

Unexercised options. You generally cannot sell an option itself. You exercise first (paying the strike price and possibly tax), then sell the shares. Some tender offers let you exercise and sell in the same transaction, which works like a cashless exercise.

RSUs at a private company. Most private-company RSUs are “double-trigger”: they need both time vesting and a liquidity event before shares are delivered. Until then there is nothing to sell. Some late-stage companies include settled RSU shares in tenders. Our guide to RSUs at private companies explains why.

How the sale is taxed

For shares from incentive stock options (ISOs), the key is the holding period. To get capital gains treatment on the full gain, you must hold the shares more than 2 years after the option grant date and more than 1 year after exercise (IRS Publication 525). Sell earlier and it is a disqualifying disposition: the spread at exercise (or your actual gain, if that is smaller) becomes ordinary compensation income, taxed at up to 37% federally for 2026, and any gain above the spread is capital gain. If you paid alternative minimum tax when you exercised, a later sale may help you recover part of that as a credit.

For shares held more than a year (and ISO shares that meet both holding periods), the gain is long-term. For 2026, a married couple filing jointly with taxable income above $613,700 pays the 20% federal rate, plus the 3.8% Net Investment Income Tax once modified AGI exceeds $250,000 (Rev. Proc. 2025-32; IRS NIIT page). At this income level, plan on 23.8% federal.

The state is where California and Washington families part ways:

• California has no lower rate for capital gains (FTB). The gain is taxed like wages: for 2025, 11.3% on joint taxable income from $891,542 to $1,485,906, 12.3% above that, plus the 1% Behavioral Health Services Tax on taxable income over $1,000,000 (FTB 2025 rate schedules). FTB had not published 2026 brackets when this was reviewed.
• Washington has no tax on wages in 2026, but it does tax long-term capital gains on stock: 7% on gains above the annual standard deduction ($278,000 for 2025, per household) and 9.9% on taxable gains above $1,000,000 (WA DOR). Washington has also enacted a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028 (WA DOR), so a sale timed for 2028 or later should be modeled again once guidance is out.

Worked example: a $200,000 tender in California vs Washington

Assumptions (illustrative): a married couple, both W-2 employees, household income about $1.15 million, two children ages 4 and 8. One parent works at a late-stage private company and holds 20,000 shares from ISOs exercised three years ago at a $2 strike; the grant was five years ago. The company runs a tender at $40 a share and allows employees to sell up to 25% of their holdings. Taxable income before the sale is $1,100,000, and they have no other capital gains this year.

1. Proceeds: 5,000 shares x $40 = $200,000.
2. Gain: $200,000 minus $10,000 cost basis (5,000 x $2) = $190,000. Both ISO holding periods are met, so it is all long-term capital gain.
3. Federal tax: $190,000 x 23.8% (20% plus 3.8% NIIT) = $45,220.
4. California tax: taxable income moves from $1.1 million to $1.29 million, all inside the 11.3% bracket and above the $1 million BHST line, so $190,000 x 12.3% = $23,370 (2025 rates).
5. Washington tax: the $190,000 gain is below the $278,000 standard deduction (2025 figure), so $0.

Two points stand out. First, the California family keeps about 66 cents of each dollar of proceeds; set the tax aside the day the cash lands, because no tax is withheld on a share sale and estimated payments may be due. Second, if the same shares had been exercised only six months before the tender, the spread at exercise would be taxed as ordinary income instead, which at this income can push the combined federal and California rate on that part close to 50%. The calendar matters as much as the price.

The decision you actually have to make

A tender window is often only a few weeks long. Decide these in advance, not in the window:

• How concentrated are you? In the example, the 20,000 shares are worth $800,000 on paper, and the same employer also pays most of the household income. Selling 25% turns a paper number into money that is real.
• What is the cash for? A home down payment, 529 funding for the kids, or simply a diversified portfolio. A named purpose makes it easier to sell without regret if the price later rises.
• Does the timing meet the holding periods? Check grant and exercise dates on your Form 3921 records before you elect to sell.
• Who else needs to know? Your CPA for estimated taxes, and your estate plan if the shares are titled to a trust.

Common mistakes

• Agreeing a price with an outside buyer before checking the ROFR and transfer rules.
• Assuming the tender price is the fair market value for tax purposes. If a tender is above the board-set value, ask the company how it reports the excess; part may be treated as compensation.
• Forgetting state tax in California because nothing is withheld.
• Selling ISO shares a few weeks before the one-year mark.
• Selling all or nothing. A partial sale is often the easiest decision to live with.

Document the reasoning for your kids

Your children will see the house or the college account. They will not see why you sold a quarter of your shares and kept the rest. Write a one-page Decision Memo: the price, what you sold, why, what you were afraid of, and what you would do differently. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.” That memo belongs in the family’s FamilyKnowledge® Library alongside the tax records.

Frequently asked questions

Can I sell my shares back to the company?

Only if the company agrees. Most private companies have no obligation to buy back vested shares, though some offer buybacks through a tender or when an employee leaves. Companies often keep a right to repurchase unvested shares at cost. Check your stock agreement and the equity plan, then ask your equity administrator whether any buyback program exists.

Can I buy shares in a private company?

Usually only through a private offering or an approved secondary sale, and most require you to be an accredited investor. For individuals, the SEC tests include income over $200,000 (or $300,000 with a spouse) in each of the prior two years, or net worth over $1 million excluding your home (SEC). Most families at this income level qualify.

Can a private company sell shares to the public?

Not freely. Selling to the general public requires registering the offering with the SEC, which is what an IPO is, or using a limited exemption with its own caps and disclosure rules. Until then, employee shares stay illiquid apart from tenders and approved secondary sales.

Next step

Pull your option grants, exercise dates and stock agreement into one folder now, before a tender is announced, so the decision takes an evening instead of a scramble. If you want help modeling the tax and the sale size, our tax management and investment risk management work covers exactly this, and the Tax & Wealth Assessment is the place to start.

This is general education, not individual advice. The right move depends on your family’s full tax, cash and estate 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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