When a company is in the startup phase, it’s common for early employees to be paid partly in stock. Early investors, too, are rewarded with a share of ownership in the company. While a company is privately held, these shares of stock are private or restricted shares. They’re governed by some restrictions. Documents must be filed with the SEC about who the private stock is being issued to. If that individual decides to sell, they must formally transfer the stock by again notifying the SEC of who the new stockholder will be.

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