Selling startup shares · United States

Selling startup shares in the United States

If you hold equity in a US private company and want to turn part of it into cash before an IPO or acquisition, here are the rules that actually apply — how you hold it, how to sell it, and how it's taxed.

General information only. This is not legal, tax or financial advice, and every situation is different. Confirm your own position with a qualified US professional before you act.

1 · What you hold

US startup equity usually comes as ISOs (incentive stock options), NSOs (non-qualified options), RSUs (restricted stock units), or already-exercised common shares. You can generally only sell settled shares. Options must be exercised (you pay the strike price to convert them) first; RSUs typically settle into shares on a liquidity event or set date. If you received restricted stock early, an 83(b) election made within 30 days of grant may have changed your tax timing — check whether you filed one.

2 · Exercising — and the AMT trap

Exercising costs cash (the strike price) and can create tax before you have any proceeds. Exercising ISOs can trigger the Alternative Minimum Tax on the spread between strike and fair value, even though you haven't sold. Exercising NSOs is taxed as ordinary income at exercise. Model this before you act — our ISO/AMT exercise calculator gives you the number in seconds.

3 · Transfer rules — ROFR, co-sale & approval

Most US companies restrict how shares can be transferred. Expect some combination of a right of first refusal (the company or its investors can buy your shares first, on the same terms), co-sale / tag-along rights, and a requirement for board or company approval of any transfer. Some companies prohibit secondary transfers entirely outside a company-run tender. Read your stock plan, grant agreement and any shareholders' agreement before you line anything up.

4 · Tax on a sale — capital gains & QSBS

When you sell, gains are taxed as capital gains: long-term rates of 0%, 15% or 20% (if held over a year) plus the 3.8% net investment income tax, or higher short-term (ordinary-income) rates if held under a year. Your state may tax on top. Crucially, if you and the company qualify, the QSBS exclusion (Section 1202) can make a large part of your federal gain tax-free — check it with our QSBS calculator before selling, because the holding-period clock matters.

5 · The practical sequence

Confirm what you hold and your vested amount in writing; check transfer restrictions and any exercise deadline; model exercise cost and tax; clear ROFR / approval; then decide whether to hold, exercise, or prepare a sale. The equity toolkit (US edition) gives you the checklists, the document requests and the questions to take to your company and advisers.

Get prepared properly

The US Equity Toolkit walks you through valuation, exercise, AMT and QSBS, transfer rules and the paperwork — step by step. Or get a personalized report modelling your own numbers.

See the toolkit & report →

Questions people ask

Can I sell private US startup shares before an IPO?

Often yes, if your shares are vested and transferable and you clear the company's transfer rules — typically a right of first refusal, co-sale rights and board or company approval. Many US companies restrict transfers, so check your equity documents first.

Do I pay tax when I exercise options?

It depends on the option type. Exercising ISOs can trigger the Alternative Minimum Tax on the spread even before you sell; exercising NSOs is ordinary income at exercise. RSUs are usually taxed as income when they settle. Confirm with a US CPA.

What is QSBS and why does it matter?

Qualified Small Business Stock (Section 1202) can exclude a large part of your federal gain from tax if you and the company meet the conditions, including a holding period. It is one of the most valuable and most overlooked US reliefs — worth checking before you sell.

Sources & references

Official references for the US rules and tax treatment described here. Always confirm the current position with a qualified professional.

Sources & official references

This guide is general and educational; the primary sources below are the authoritative places to confirm the rules for your own situation.

General information only — not financial, tax or legal advice. US tax rules are complex and change; confirm your own position with a qualified US professional. PrivateTechShares is an education and tools service: it is not a broker or marketplace, does not introduce buyers and sellers, does not hold funds, and does not execute or advise on transactions.