I am owner of a portion (5%) of a small business. I acquired my shares as 'sweat equity' being the creative lead on the project. Essentially, I want to get cash for my shares. At this point in my life I don't really want to be a business owner, but money in the bank would be nice. What are some ways I can go about doing this?

Can I post it on Craigslist? Can I use it as a collateral to get a loan or something?

I have already tried selling to the main shareholder, but they're not willing/able to buy at the moment. I've also tried selling to some other shareholders/ people associated with the business but the most I've done is offload a single share at under the appraised value.

A bit about the business:

It is an entertainment business located on a main street in a city in California, USA. It has been open over 2 years now and has been profitable for most of its existence. It is well run and the majority shareholder generally does what the other shareholders advise. It seems like a solid little thing with a lot of potential for growth. I'm just not a business owner.

Any advice would be greatly appreciated.

  • 1
    Why don't you want to continue being a passive investor? What kind of legal entity is this? What limitations are there on the ownership transfer?
    – littleadv
    Dec 31 '14 at 0:07
  • 1
    I'm pretty sure you can't sell the securities to someone else; you're bumping into SEC rules at that point.
    – Eric
    Dec 31 '14 at 0:20
  • @littleadv to be perfectly frank I need the money(I'm broke). The company is an LLC. I'm not aware of any limitations on the transfers. The owner is a friend of mine so I'm not excepting anything from him.
    – jacobcc
    Dec 31 '14 at 0:47
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    @babpacih you'll need to look at the operating agreement. Many times boilerplate LLC agreements have limitations on transfer. In any case, since you're not talking about the actual shares - you'll have to find someone who'd want to join as a partner to the LLC which is not as easy as selling a C-Corp stock.
    – littleadv
    Dec 31 '14 at 1:00
  • 1
    @babpacih you might want to read through the rules and see if any of it rings any bells. sec.gov/info/smallbus/qasbsec.htm#noreg basically they're designed to protect the average joe from buying worthless stock. no disclosure, etc.
    – Eric
    Dec 31 '14 at 1:01

There are a lot of things that can be specified in the LLC agreement / charter, such as unequal distribution profits, sales restrictions, classes of ownership, etc. You should read your LLC paperwork.

That said, you are generally allowed to sell ownership in an LLC in a private transaction. If you advertise the share of the LLC for sale, it's probably a violation of SEC rules. So Craig's List is a bad idea. Word of mouth or a broker is the way to go.

I am not a lawyer or accountant -- you should double check this information; it might be wrong.

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