A stock purchase agreement (SPA) documents the sale of shares in a private corporation: how many shares, of what class, at what price, and when the closing happens. Its heart is the set of representations and warranties, the seller promising clean title to the shares and the buyer promising a lawful, investment-purpose acquisition.
It is used for anything from a founder selling a stake to a co-owner, to the purchase of an entire company through 100 percent of its stock.
Stock sale vs asset sale
Buying stock means buying the company as it stands: its contracts, licenses, and history come along automatically, including its liabilities. Buying assets lets the buyer pick what to take and leave liabilities behind, but requires re-titling every asset and re-signing key contracts. Sellers generally prefer stock sales (simpler, often better capital gains treatment); buyers often prefer asset sales. For transfers between existing co-owners, a stock sale is almost always the natural instrument.
| Stock sale | Asset sale | |
|---|---|---|
| What transfers | The entity itself | Selected assets only |
| Liabilities | Stay with the company | Mostly left behind |
| Contracts and licenses | Usually unaffected | Often need reassignment |
| Typical preference | Seller | Buyer |
Why representations and warranties matter
In a private stock sale there is no public market disclosure, so the contract itself carries the truth. The seller warrants sole ownership free of liens, authority to sell, and that any rights of first refusal have been cleared. The buyer warrants an investment-purpose purchase, which supports the securities law exemption most private sales rely on. Under this template both sides indemnify each other for breaches, and the warranties survive closing for 24 months.
Check the company's transfer restrictions first
Most private companies restrict share transfers in their bylaws or a shareholders' agreement: rights of first refusal, board consent, or co-sale rights. Obtain the required consents before signing; a transfer in violation can be void.
What happens at closing
- The seller delivers endorsed share certificates or signed transfer instructions for uncertificated shares
- The buyer pays by wire, certified check, or a down payment plus promissory note
- The company records the transfer in its stock ledger and issues new certificates
- Both parties keep signed originals with the corporate records
For installment sales, the seller commonly keeps a security interest in the shares until the note is paid, which this template provides for.
Frequently asked questions
Do securities laws apply to a private stock sale?
Yes. Private sales rely on exemptions from registration, which is why the buyer represents an investment-purpose purchase. Routine sales between individuals are usually exempt, but sales to multiple buyers or with public solicitation need securities law advice.
What is the difference between a stock purchase agreement and a bill of sale?
A bill of sale transfers tangible property like a vehicle or equipment. Shares are intangible and carry legal baggage (title, restrictions, securities laws), so they transfer through an SPA with representations, warranties, and closing mechanics.
Can I use this for LLC membership interests?
No. LLC interests are not stock; they transfer under a membership interest purchase agreement governed by the operating agreement's rules. Use this template only for shares of a corporation.
Who pays taxes on the sale?
The seller generally recognizes capital gain or loss on the difference between the sale price and their basis in the shares. The buyer's basis becomes the purchase price. Installment sales can spread the seller's gain over the payment years; ask a CPA.
Is a lawyer necessary for a stock sale?
For a straightforward sale between known parties at an agreed price, this self-help agreement covers the essentials. For sales of control, earn-outs, complex warranties, or any dispute about value, have a business attorney review the deal before signing.