Some companies, both private and public, issue shares to their own employees as part of a compensation program. This is designed to motivate employees by tying a portion of their pay to the company's earnings. Eventually, the employees are going to want to sell those shares.

Public or Private

If the company is public, it's a simple process. An employee can sell the shares through a broker.

Private shares cannot be sold as easily. Because they represent a stake in a company that is not listed on any exchange, the shareholder has to find a willing buyer. In addition, the company must approve the sale.

If It's a Startup Company

If you're working for a young company that is aiming to build a business and take it public with an initial public offering (IPO), you may be in luck.

There are a number of web-based companies like EquityZen and SharesPost that are designed to connect people with pre-IPO shares to sell and investors eager to buy them. They are, essentially, venture capital markets for the masses, or at least for investors who may have thousands rather than millions to invest in a risky venture, and shareholders who may have hundreds rather than thousands of shares of stock to sell.

An employee who holds stock in a pre-IPO private company can list shares for sale on this market.

Note: The transaction must be approved by the company that issued the shares. Some companies may not want their shares spread around at the moment. In addition, some employees of startups have felt pressure to hold onto their company stock as a kind of proof of loyalty. At the least, you should produce a good reason for the sale, such as a downpayment on a house.

There's also a word of warning for potential investors: Some of these secondary market sites offer loans to buy pre-IPO stock. Be careful. Read the fine print to find out precisely how much interest you will pay, not to mention what happens if your IPO tanks.

When It's Not Pre-IPO

It is trickier to sell stock in a company that is private and has no intention of going public.

The lack of information about most private companies dissuades most outside investors, who are reluctant to buy into a company they know nothing about and can't thoroughly research in public documents.

In any case, the company may not approve the sale of its stock to outsiders.

The simplest solution for selling private stocks is to approach the issuing company and inquire about what other investors did to liquidate their stakes.

Some private companies have buyback programs, which allow investors to sell their shares back to the issuing company. It is likely that a company has foreseen that employees eventually will want to monetize this benefit.

If not, an insider may be able to provide leads about current shareholders or potential investors who have expressed interest in buying the company's shares.

The stock seller would be wise to visit a securities lawyer to make sure the paperwork is done correctly. Although private stocks are not registered with the Securities and Exchange Commission (SEC), all SEC regulations involving selling stocks must still be followed.