How Can I Sell Shares? A Process Overview

Selling shares is a common financial activity. Whether acquired through compensation plans, inherited assets, or market purchases, understanding how to convert them into usable funds is an important financial skill. Liquidating these holdings effectively requires familiarity with the necessary steps. This overview guides individuals through the process of selling shares.

Establishing the Means to Sell

Shareholders need channels to access and transact with holdings. Shares are commonly held electronically in brokerage accounts, where firms maintain digital records. This streamlines transactions and provides a centralized view.

Employee plan shares (ESPPs, RSUs, ISOs) are often held by a plan administrator with a linked brokerage account. Some older shares exist as physical stock certificates. To sell these, they must first be converted to electronic format by depositing them into a brokerage account.

This involves endorsing and mailing the certificate to the brokerage for verification and crediting. Depositing physical certificates can take several business days or weeks.

Opening an account is foundational for those without an existing brokerage relationship. Various brokerage firms exist, from online discount brokers with lower fees to full-service brokers offering advice. The choice depends on investment experience and need for guidance. Online discount brokers generally charge $0 to $10 per equity trade, while full-service brokers may charge higher fees.

Opening a brokerage account requires personal information (Social Security number, date of birth, government ID) for KYC compliance. Applicants also provide financial details like employment and income. Once approved, the account must be funded via electronic transfer, mailed check, or existing securities transfer. Linking existing shares or depositing physical certificates involves completing transfer forms.

Understanding Sale Mechanics and Costs

Understanding order types and costs is necessary before a share sale. A market order instructs the brokerage to buy or sell shares immediately at the best price. While this ensures prompt execution, the final price can vary, especially in volatile markets. This can lead to price uncertainty.

A limit order specifies a maximum buying price or minimum selling price. The order executes only if the market price reaches the limit. While a limit order provides price control, there is no guarantee of execution if the price is not met. For example, a sell limit order placed at $50 for a stock currently trading at $49 will only execute if the stock price rises to $50 or higher.

Selling shares incurs commissions and regulatory fees. Brokerage firms charge commissions for trades, from zero for online discount brokers to several dollars for specialized services. These fees are deducted from sale proceeds. For instance, a commission of $5 on a $1,000 sale would result in net proceeds of $995 before other fees.

Small regulatory fees are imposed on stock sales. The Securities and Exchange Commission (SEC) charges a fee on sell transactions. The Financial Industry Regulatory Authority (FINRA) also imposes a Trading Activity Fee (TAF). These fees are minor but are a standard part of transaction costs.

After execution, the transaction settles before funds become available. Most stock trades settle in “T+2,” meaning two business days after the transaction. For example, a stock sold on a Monday would typically settle by Wednesday, assuming no market holidays. Understanding this period is important because sale proceeds are not immediately available until settlement is complete.

Initiating and Completing a Sale

Selling shares online involves straightforward steps once an account is established and funded. The process begins by logging into the brokerage account with secure credentials, often with two-factor authentication. After logging in, users navigate to the trading section, commonly labeled “Trade” or “Place Order.” This section provides the interface for initiating transactions.

Within the trading interface, select the stock to sell by entering its ticker or company name. Once identified, specify the quantity of shares to sell. Accurately input the number of shares to avoid over-selling or under-selling. The platform displays the current market price.

Next, select the desired order type. This choice dictates how the order executes. A “market order” instructs the brokerage to sell shares immediately at the prevailing market price. A “limit order” requires a specific price, executing only if that price or higher is achieved. The platform may also offer options for the order’s duration, such as “day order” (expires at market close) or “good-til-canceled” (remains active until filled or canceled).

Before finalizing, the platform presents a review screen summarizing order details. This screen includes stock ticker, shares, order type, and estimated costs (commissions and regulatory fees). Reviewing these details is important to confirm accuracy. After verifying, confirm the order to send it for execution.

Upon successful execution, the platform provides an order confirmation, detailing executed price and total proceeds (minus fees). Order status can be monitored in the account’s “Order Status” or “Activity” section. While the sale is complete, funds are not immediately available. The T+2 settlement process means cash proceeds become available two business days after trade date for withdrawal or reinvestment.

Tax Considerations for Share Sales

Selling shares can result in a capital gain or loss, impacting tax. A capital gain occurs when shares sell for more than their original cost. Conversely, a capital loss arises when shares sell for less than their original cost. Gains and losses are categorized by holding period.

Shares held for one year or less generate short-term capital gains or losses. These short-term gains are generally taxed at ordinary income tax rates. Shares held for more than one year result in long-term capital gains or losses. Long-term capital gains typically receive more favorable tax treatment (0%, 15%, or 20% rates depending on income). Understanding this distinction is important for tax planning.

Capital gain or loss calculation relies on cost basis. Cost basis is the original value of an asset for tax, including purchase price and acquisition fees. For example, if shares were bought for $100 and $5 in commission, the cost basis would be $105. When these shares are sold for $120, the capital gain is $15 ($120 selling price – $105 cost basis).

Determining cost basis can be complex for shares acquired at different times or prices. The Internal Revenue Service (IRS) allows different methods to calculate cost basis. The “First-In, First-Out” (FIFO) method assumes that the first shares acquired are the first ones sold. Another method is specific identification, which allows an investor to choose which specific shares are sold.

For tax reporting, brokerage firms provide Form 1099-B, “Proceeds From Broker and Barter Exchange Transactions,” by mid-February. This form reports gross proceeds, sale date, and often cost basis. Investors use Form 1099-B to complete Schedule D, “Capital Gains and Losses,” and Form 8949, “Sales and Other Dispositions of Capital Assets,” when filing federal income tax. Accurate reporting is necessary to comply with tax regulations and calculate tax liability or deductions.