Secondary-Market Private Stock: Forge vs EquityZen Tax Math

Forge Global and EquityZen are the two largest secondary-market platforms connecting pre-IPO equity holders with accredited investors looking to buy private-company stock. The platforms exist for the same reason as company-sponsored tender offers: employees and founders accumulate vested-but-illiquid equity that they cannot sell on a public market, and outside investors want exposure to late-stage private companies without waiting for the IPO. The platforms broker the connection, handle the legal and operational mechanics, and charge a fee for the service.

The key differences from tender offers: secondary-market sales are typically smaller, negotiated transactions between individual sellers and individual buyers (or fund vehicles), rather than company-sponsored bulk transactions at a fixed price. Sellers have more flexibility on timing and price, but face more friction — platform fees, company right-of-first-refusal requirements, lengthier approval processes, and lower buyer demand for some shares. This article walks through how Forge and EquityZen compare on fees and process, the tax mechanics for the same stock types covered in tender-offer analysis, the right-of-first-refusal interaction, and the worked tax math on a $500K secondary-market sale.

How Forge and EquityZen are structured

Forge Global

Forge (formerly known as SharesPost before the 2020 merger) operates as a marketplace for direct share transfers between accredited buyers and sellers. The platform's process:

• Sellers register, complete eligibility verification (accredited investor status, current or former employment with a listed company, vested holdings)
• Buyers register, complete accredited-investor verification, and indicate which companies they want to buy shares in
• Forge matches buyers and sellers, negotiates price, and structures the transaction
• The company's legal and finance teams are notified and asked to approve the transfer (including ROFR analysis)
• If approved, the share transfer is documented through a stock purchase agreement, the buyer wires the purchase price, and Forge transfers the shares
• Forge collects a transaction fee — historically 3 to 5 percent of the transaction value, often split between buyer and seller

Forge has facilitated sales at many large pre-IPO companies. The platform typically requires minimum transaction sizes ($100,000 or higher) and has established relationships with the legal teams of many late-stage private companies — which speeds the approval process.

EquityZen

EquityZen often structures transactions through fund vehicles rather than direct share transfers. The typical EquityZen process:

• EquityZen creates a special-purpose vehicle (SPV) or fund structure for each listed company
• Multiple accredited investors pool capital into the SPV, which acquires shares from the seller
• The SPV holds the shares on behalf of the investor pool, distributes any future liquidity events pro rata, and handles tax reporting
• The seller transacts with the SPV as a single counterparty, simplifying the legal documents
• EquityZen charges fees that can total 5 to 7 percent of transaction value, including management fees for the SPV and any platform charges

The SPV structure simplifies the seller's process — one counterparty, one set of documents — but creates an additional layer of complexity for the buyer pool and the company. Some companies prefer the SPV structure because it concentrates the new ownership in a single entity for cap-table simplicity; others prefer direct share transfers (Forge model) because it avoids the SPV layer.

Other platforms and direct sales

Besides Forge and EquityZen, the secondary market includes:

• Carta X — Carta's marketplace, leveraging Carta's role as the cap-table provider for many private companies
• Hiive — a newer platform focused on direct broker-style transactions
• Direct broker sales — private brokers facilitate transactions between specific buyers and sellers without a platform layer
• Company-led secondary programs — some companies coordinate secondary activity directly with approved buyers, bypassing third-party platforms

The choice of platform depends on the company's listed shares availability, the buyer demand for that particular company, the transaction size, the desired closing timeline, and the platform fees applicable to the deal.

Tax treatment: same as any private-stock sale

The tax treatment of a secondary-market sale follows standard IRC section 1001 capital-gain mechanics, with the same stock-type analysis covered in pre-IPO tender-offer planning:

ISO shares

• Qualifying disposition (held 2+ years from grant and 1+ year from exercise): entire gain above exercise price is long-term capital gain. Prior-year AMT credit (if any) offsets regular tax in the sale year.
• Disqualifying disposition: ordinary-income portion equals lesser of spread at exercise or actual gain; remaining gain is short-term or long-term capital gain based on holding period.

NSO shares

Ordinary income was recognized at exercise on the spread between exercise price and FMV at exercise. The secondary-market sale generates capital gain on appreciation from FMV at exercise to sale price — LTCG if held more than 1 year from exercise.

RSU shares

Ordinary income was recognized at vest on the FMV at vest. The secondary-market sale generates capital gain on appreciation from vest FMV to sale price — LTCG if held more than 1 year from vest.

Founder shares with 83(b) election

Basis is the grant-date FMV reported under the 83(b) election. The secondary-market sale generates capital gain on the full appreciation from grant to sale price — LTCG if held more than 1 year from grant. Often qualifies for QSBS treatment under section 1202 if the additional QSBS requirements are met.

Restricted shares without 83(b)

For employees who received restricted stock without filing 83(b), ordinary income was recognized at each vesting milestone based on FMV at vest. Each vesting tranche has its own basis and holding period. The secondary-market sale must be analyzed by tranche, with each tranche treated separately for capital-gain holding period and basis purposes.

Intermediary fees: tax treatment

Platform fees on Forge and EquityZen are treated as selling expenses under IRC section 1001. The full sale price is the seller's amount realized; the platform fee reduces the amount realized for gain calculation purposes.

For a $500K sale through Forge with a 5 percent fee ($25K):

• Gross sale price: $500,000
• Platform fee (selling expense): $25,000
• Net cash to seller: $475,000
• Amount realized for tax purposes: $500,000 minus $25,000 equals $475,000
• Tax base: $475,000 minus seller's basis in the shares equals the net taxable gain

Note that the platform fee is not separately deductible — it is incorporated into the amount realized calculation. The 1099-B issued by the platform may show gross or net proceeds depending on the platform's reporting practices. Sellers should reconcile the 1099-B with their own records when filing the tax return to ensure accurate basis and gain reporting on Schedule D and Form 8949.

Worked example: $500K secondary-market sale, three stock-type scenarios

Alex is a senior product manager at a late-stage private company valued at $5 billion. He has accumulated significant vested equity over 6 years and wants to sell $500,000 of stock to fund a home purchase and reduce concentration risk. He chooses Forge as the platform with a 5 percent total fee ($25,000). The company approves the sale after the standard 30-day ROFR period passes without the company exercising. The current Forge transaction price is $50 per share. Alex is a California resident at the 50.3 percent combined federal-and-state ordinary-income marginal rate and 37.1 percent combined federal-and-state LTCG-and-NIIT rate. He considers three different stock lots.

Scenario A: tender 10,000 ISO shares (exercised 3 years ago at $5, granted 5 years ago)

• Gross proceeds: 10,000 times $50 equals $500,000
• Platform fee: $25,000
• Cost basis: 10,000 times $5 equals $50,000
• Holding period satisfies both 2-year grant and 1-year exercise tests: qualifying disposition
• Long-term capital gain (after platform fee): $500,000 minus $25,000 minus $50,000 equals $425,000
• Federal LTCG (20 percent): $85,000
• Federal NIIT (3.8 percent): $16,150
• California tax (13.3 percent on $425,000): $56,525
• Total tax: $157,675
• Net cash after fees and tax: $475,000 minus $157,675 equals $317,325
• AMT credit recovery (if AMT was paid at original exercise on $300K spread): potential additional benefit of $50,000-$80,000 from prior AMT carryforward

Scenario B: tender 10,000 RSU shares (vested 2 years ago at $30 FMV)

• Gross proceeds: 10,000 times $50 equals $500,000
• Platform fee: $25,000
• Cost basis: 10,000 times $30 vest-date FMV equals $300,000
• Holding period more than 12 months from vest: long-term capital gain
• Long-term capital gain (after platform fee): $500,000 minus $25,000 minus $300,000 equals $175,000
• Federal LTCG (20 percent): $35,000
• Federal NIIT (3.8 percent): $6,650
• California tax (13.3 percent): $23,275
• Total tax: $64,925
• Net cash after fees and tax: $410,075

The RSU shares produce a much lower tax bill at sale because the ordinary-income event happened at vest with full ordinary-rate tax. The total lifetime tax across vest and sale is similar to the ISO scenario; the at-sale tax is just lower because the ordinary-income recognition is in the past.

Scenario C: tender 10,000 founder shares with 83(b) (granted 6 years ago at $0.01)

• Gross proceeds: 10,000 times $50 equals $500,000
• Platform fee: $25,000
• Cost basis: 10,000 times $0.01 equals $100
• Holding period 6 years from 83(b) grant: long-term capital gain, and potentially QSBS-eligible
• Long-term capital gain (after platform fee): $500,000 minus $25,000 minus $100 equals $474,900
• If QSBS-eligible (full exclusion within $10M cap): federal tax $0, federal NIIT $0
• California tax (13.3 percent on $474,900 — CA does not conform to QSBS): $63,162
• Total tax: $63,162
• Net cash after fees and tax: $411,838
• If not QSBS-eligible: federal LTCG plus NIIT on $474,900 equals $113,026; CA tax $63,162; total $176,188; net cash $298,812

The right-of-first-refusal interaction

ROFRs create the single biggest operational friction in secondary-market sales. The standard ROFR mechanic:

1. Seller negotiates sale with secondary-market buyer at price X for share count Y
2. Seller (or platform on seller's behalf) notifies company in writing of the proposed transaction
3. Company has a contractually specified period (typically 30 days but can be longer) to decide whether to exercise the ROFR
4. If company elects to exercise: company purchases the shares from the seller at price X for share count Y; the secondary-market sale is preempted
5. If company elects not to exercise (or fails to respond): the seller may proceed with the secondary-market sale at the original terms

The ROFR creates several operational challenges:

• Timing risk for the buyer. The 30+ day ROFR period means the secondary buyer's purchase commitment must be held open for that period. If the buyer's investment thesis or available capital changes during the ROFR period, the buyer may walk away when the company declines.
• Information disclosure. The seller must disclose the buyer's identity (or at least the buyer's general profile), the price, and the share count to the company. This can be commercially sensitive — particularly if the buyer is a competitor, a future investor, or a journalistic entity. Some platforms structure transactions to limit company disclosure to the price and share count only.
• Cap-table cleanup vs. growth. Companies sometimes use ROFRs strategically: exercising the ROFR when they want to consolidate the cap table or reduce the number of accredited holders, declining when they want to allow employee liquidity and avoid using company cash. The seller cannot predict the company's decision until the ROFR period runs.
• Co-sale rights. Some equity documents include co-sale or tag-along rights for major investors — meaning that if the seller's shares are bought, certain preferred shareholders can include a pro-rata portion of their shares in the same sale. This can dilute the seller's transaction size or require negotiation of a larger overall deal.

Section 144A and Rule 701 securities-law framework

Secondary-market sales of pre-IPO private stock occur under specific SEC exemptions from the registration requirements of section 5 of the Securities Act of 1933. The most common exemptions:

• Rule 144A: permits resale of restricted securities to qualified institutional buyers (QIBs) without registration. Forge and EquityZen typically structure transactions to qualify under 144A, requiring the buyer to be a QIB or accredited investor under regulation D.
• Rule 701: permits the issuance of securities by private companies to employees under compensatory benefit plans without registration. The original employee stock grants (options, RSUs) typically rely on Rule 701; secondary sales of those shares require a separate exemption.
• Section 4(a)(2) and Regulation D: private placement exemptions that apply to sales to accredited investors. Most secondary-market transactions rely on these exemptions for the buyer-side qualification.
• Section 4(a)(7) — affiliate resales: a relatively newer safe harbor under section 4(a)(7) of the Securities Act for resales to accredited investors. Some platforms structure transactions to qualify under 4(a)(7).

The platform handles the securities-law compliance through standard documentation and accredited-investor verification. The seller's tax obligations are independent of the securities-law analysis — the same capital-gain rules apply regardless of which exemption the platform uses.

Comparing Forge, EquityZen, and tender offers: when to use which

Use a company-sponsored tender offer when:

• The company is actively running a tender offer with broad eligibility
• Many employees are participating and the program is well-established
• The tender price meets your desired liquidity range
• The 30-day or 60-day participation window matches your liquidity timeline
• You want simpler legal documentation and lower transaction fees (typically 1-3 percent or company-absorbed)

Use Forge or EquityZen secondary-market when:

• No company tender offer is currently active
• You want to sell more (or less) than the tender offer would allow
• You can absorb the higher platform fee (3-7 percent) in exchange for transaction flexibility
• The company permits secondary-market activity in your equity documents
• The company has sufficient buyer demand on the platform to make a transaction feasible

Use direct private sale when:

• You have a specific accredited buyer (a known investor, friend, or family member) ready to purchase
• The transaction size is too small for platform efficiency (under $100K)
• You can negotiate a custom price and terms that benefit both sides
• You want to minimize platform fees and have access to qualified securities counsel for documentation

Tax planning around secondary-market sales

Several planning considerations apply specifically to secondary-market transactions:

• Lot selection. Most equity systems allow employees to specify which share lots are being sold. Tax-efficient lot selection (highest basis first for ordinary-income comparison, oldest lots first for LTCG comparison, QSBS-eligible lots first) can materially affect the after-tax result. Coordinate with the company's stock administration team to confirm lot-tracking accuracy.
• Multi-year planning. If you anticipate selling significant equity over multiple years (rather than a single large transaction), spreading the sales across tax years can reduce bracket-pushing effects, NIIT exposure, and IRMAA Medicare-surcharge exposure. A $1M sale in a single year pushes into all top brackets; the same $1M split across two years often produces a lower combined tax bill.
• State tax timing. Sellers planning a state-of-residence change should consider whether the sale falls before or after the move. The sourcing rules vary by state and stock type; intangible-property gain is typically sourced to the seller's domicile at the time of sale.
• Cash-flow planning for AMT and quarterly estimates. The platform may not withhold taxes on the sale proceeds. The seller is responsible for federal and state estimated tax payments on the realized gain. For larger sales, the underpayment penalty exposure under section 6654 may require quarterly payments rather than a year-end settlement.
• Donor-advised fund and charitable bunching. Donating appreciated pre-sale shares directly to a DAF (rather than selling and then donating cash) avoids recognition of the gain on the donated portion. The deduction is the FMV of the donated shares (subject to AGI limits and FMV-vs-basis rules for non-publicly-traded securities).

Risks of secondary-market platforms

Several risks deserve attention before initiating a secondary-market process:

• Company rejection. If the company exercises the ROFR or refuses to approve the transfer, the seller has spent time and may have incurred platform fees with no completed transaction.
• Price uncertainty. Unlike tender offers (fixed price), secondary-market prices are negotiated and may be lower than the latest 409A valuation. Buyers price for liquidity discount, future dilution risk, and time-to-IPO uncertainty.
• Disclosure obligations. The company may receive information about the seller's holdings, the buyer's identity, and the price. This can create reputational or relational consequences depending on the company culture.
• Tax-reporting complexity. Platform-issued 1099-B may not show the seller's basis (which the platform does not have access to), requiring the seller to maintain basis records and reconcile carefully on Schedule D and Form 8949.
• SPV structure risk (EquityZen). Sales into an SPV mean the seller has a single counterparty but the underlying investors may have indirect rights (information rights, governance rights at the SPV level) that the seller is not party to. SPV structure also creates a layer between the seller and the eventual liquidity event if the SPV holds shares through IPO.

Key takeaways

• Forge Global and EquityZen are the two largest secondary-market platforms for pre-IPO stock sales. Forge typically structures transactions as direct share transfers between buyers and sellers; EquityZen often uses SPV/fund structures that pool multiple buyers.
• Platform fees range from 3 percent (Forge) to 7 percent (EquityZen including SPV management). The fees reduce the seller's amount realized for tax purposes — they are not separately deductible, they are incorporated into the gain calculation.
• Tax treatment is the same as for any pre-IPO stock sale and depends on stock type: ISO qualifying-vs-disqualifying disposition under section 422; NSO capital gain on post-exercise appreciation; RSU capital gain on post-vest appreciation; founder shares with 83(b) producing LTCG on full appreciation from grant. QSBS section 1202 may apply for founders and early employees holding 5+ years.
• The company's right-of-first-refusal is the most common operational friction. The company has typically 30+ days to decide whether to match the third-party offer. Failed ROFR approval blocks the sale and may have already cost the seller time and platform engagement.
• Secondary-market sales rely on specific SEC exemptions (Rule 144A for institutional resales, Regulation D for accredited-investor sales, section 4(a)(7) for affiliate resales). Platform compliance is the platform's responsibility; the seller's tax obligations are independent.
• On a $500K secondary-market sale with 5 percent platform fee: ISO qualifying-disposition shares produce approximately $317K of after-tax cash for a CA-resident seller; RSU shares with 2-year holding period produce approximately $410K; founder shares with 83(b) and QSBS produce approximately $412K. The differences reflect basis (ISOs $50K vs RSUs $300K vs founder $100) and prior-year ordinary-income recognition.
• Choose between tender offers and secondary platforms based on availability, transaction size, fee tolerance, timing requirements, and company permissions. Tender offers are generally lower-friction when available; secondary platforms provide flexibility when tender offers are not running or do not meet the seller's specific needs.
• Tax planning levers include lot selection (specify high-basis or QSBS-eligible lots first), multi-year sale spreading to reduce bracket and IRMAA effects, state-of-residence timing, quarterly estimated tax payments to avoid section 6654 underpayment penalties, and direct stock donations to donor-advised funds to avoid recognition on the charitable portion.