Selling private shares of a corporation and selling public shares of a corporation aren’t precisely two sides of an equivalent coin.

There are big differences between public and personal stock ownership and significant hurdles to cross for shareholders looking to sell privately-held stocks.

What’re the best thanks to selling private shares of a corporation, especially if you would like to sell right now? Here’s a primer on private company shares and how to sell them quickly, legally and efficiently.

What Is a Personal Company Stock?

Shares of personal company stock are exactly what they sound like — shares of a private company issued to investors and sometimes to corporate employees.

Companies place a high premium on private shares of stock. They use those shares as a recruitment tool to draw in high-quality employees when cash is additionally at a premium.

By linking private shares of stock in an employee compensation package, private companies give employees skin within the game. The higher the worker does, the notion goes, the higher the company’s private shares of stock will do.

Private company stocks very from publicly-traded stocks in multiple ways:

• Unlike public stocks, private stocks do not have to be registered with the US Securities and Exchange Commission, meaning private stocks aren’t scrutinized by regulators, as are public company stocks.

• Unlike public stocks, private companies aren’t required by law to issue regular quarterly and annual financial (i.e., earnings) reports to investors or the general public. That scenario could be too ‘private’ for stock buyers, who typically require earnings reports and transparent financial analysis when vetting stocks to shop for.

• Unlike publicly traded stocks, private stocks aren’t sold on Bul

• Private companies are usually significantly smaller than publicly traded stocks and thus have fewer shares to sell. that creates them less liquid than public stocks and thus often harder to sell.

• There are fewer brokers to figure out to sell a personal stock. Usually, you’ve got to look far and wide to sell private shares of stock, and therefore the private company that holds the stock must approve the sale.

How to Sell Privates Shares of a corporation 

There are myriad obstacles to selling private company stock.

For example, since the private stock’s name and the price isn’t listed on any exchange, it’s up to you, the vendor, to seek out a willing buyer for your shares of stock.

Additionally, the private company might not want you to sell your private shares of stock, especially if you’re an employer. When employees hold shares of their company’s stock, they’re often pressured by company management to hold on to their shares as long as possible, as evidence of your loyalty to the corporate as a personal shareholder.

You can, however, sell your shares during a private company within the following scenarios:

Sell Your Shares Back to the corporate That Issued the Stock

This is the main common way for sellers to shed their shares of personal company stock. Often, companies will engage in share buyback programs where they’ll comply with purchase a predetermined number of personal stock shares, giving sellers a ready-made buyer for the stock who’ll likely pay a reasonable price within the transaction.

You’ll need to act fast, though, simply because a corporation opts to authorize a share buyback program doesn’t guarantee they’ll buy your stock. Be able to sell when word gets out on a personal company purchase program.

Through a Pre-Initial Public Offering Sale

When a personal company wants to boost cash, it can transition to a publicly-traded company via an initial public offering. IPOs shine a spotlight on a specific company stock being traded for the primary time and thus make selling IPO shares easier to sell. The pre-IPO market is substantial in size, with no shortage of interested buyers—some estimates of the dimensions of the pre-IPO market.

With a pre-IPO, the vendor can list their stock publicly, making it much easier to draw in buyers.

Through Non-Pre-IPO Private Stock

If the stock owned by a personal stockholder isn’t going public anytime soon, selling shares of that stock becomes more of an uphill climb — but it is often done.

With private shares of stock, there is no listing of any information on the stock and no share price to list also. Also, private shares of stock cannot be sold unless a green light is given by the company’s high echelon decision-makers, who might not want the stock sold to company outsiders.

What private companies often do, however, is purchase the private shares themselves, constantly available buyback programs. Or, if the sale is approved, the corporate can steer the vendor toward qualified buyers that management approves of and shut the deal that way.

By Appealing to the corporate With a Declaration of Why You’re Selling the Stock

While private companies do hold the cards within the sort of share price sale approval, most aren’t heartless ogres who’ll never allow you to sell your private shares of company stock.

If you submit a sales request that has why you’re selling the stock –i.e., you’re getting married or buying a home, for instance, the corporate could approve your share price sale.

Private companies want to carry on to top talent even as very much as public companies do. If you give them a genuine reason to sell your shares, the likelihood is that they’ll go along to stay you in-house and motivated to remain to produce for the corporate.

A Private Stock Sale Action Plan

Once you’ve decided to sell your private stock shares, you’re just about on your own.

There is likely no stockbroker, no stock market, and no public information on your company to draw buyers.

How to navigate a trickier stock sales market when you’re on the private side of the street? Take these action steps:

Put the Word Out You’re Selling Your Stock

Work with the corporation whose stock you’re selling to seek out qualified buyers. The likelihood is that the higher-ups at the corporate will know who will be interested in buying the stock and who can pay an excellent price to shop for the stock.

Start with the firm’s investor relations officer (if it’s one) or the corporate treasurer or chief treasurer. The company’s human resources staff can also be invaluable in getting you on the proper path directly, find a buyer.

Be Transparent as Possible

You want to be as forthcoming as possible with potential buyers. After all, the more information you provide on the corporate and its stock, the more your buyer will trust you and feel comfortable buying your shares of stock. Most buyers will know something about the stock, or they would not be interested in the first place.

It’s your job to disclose the maximum amount of information possible without making a gift of any company trade secrets. A non-disclosure agreement signed by the customer should take any worries off the table.

Know Your Stock Ownership Contract

You’ll likely have a corporation shareholder agreement that will provide insight and direction on what rights you’ve got as a shareholder. There’ll be various finance and tax issues involved within the sale of the stock, also as language on the bounds of what company information you’ll reveal to potential buyers of your stock.

Thus, it is a good idea to review your private stock ownership agreement thoroughly and confirm you’re following the principles when selling your private shares of stock.

Wait a Year to Sell

Once you purchase shares of a personal company’s stock, know that trying to ‘flip’ the stock for a fast profit will get the eye of the private company’s executives, who take a dim view of quick stock resales.

It could also draw the eye of regulators preferring to ascertain private stock shareholders hold on to a stock for a short time to demonstrate intent to carry the stock properly.

While there’s no agreed-upon timetable to sell private stock shares, hanging on to them for one year won’t raise any eyebrows, and your stock may even grow in value during your ‘holding period.’

Aim For Accredited Investors

It’s not uncommon for courts to side with buyers in cases of improprieties over private stock sales gone wrong. Often, a judge will reprimand a stock seller for cutting an affect unsophisticated investors who didn’t know what they were stepping into with the acquisition of personal stock.

Stay away from any legal wrangling and work strictly with accredited investors, i.e., well-off buyers who have $1 million in net worth and $200,000 in annual income ($300,000 with a spouse.) High net-worth buyers (often they’re executives at the corporate which issued the stock) are usually wiser to the ways of Wall Street than the general public, and regulators and corporations who issue private shares of stock prefer those individuals buy private stock. Only too often, the system takes an equivalent view.

The Takeaway on Selling Privates Company Stocks

There are substantial differences between private and public stocks, especially within the way private stocks are sold.

Consequently, it’s up to you, the private stock shareholder, to understand the principles of the road when you are looking to sell private shares of stock. That’s not only the most straightforward thanks to shedding your private company shares; it’ll also significantly curb the chances of regulators, courts, and upset private company stock issuers taking a harsh view on your stock sale and keep you out of harm’s way within the process.