Tax Center Global Tax Guide / Glossary / Discussion / Newsletters / About Us
Register Log In
Early-Exercise Options   
Going Public   

Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.


Pre-IPO explores the tricky world of stock grants in private companies and startups.

Browse an overview of this section below, or explore the subtopics to the left.

Learn key terms and concepts in Basics. Special stock options sometimes used by privately held companies are the subject of Early-Exercise Options. Learn what an IPO may mean for your stock grants in Going Public.

Test Your Knowledge Test and improve your knowledge with our Pre-IPO quiz and its study guide in the answer key.

  Articles   FAQs  

Stockbrokers' Secrets: Financial Planning For Equity Compensation At IPO Companies

John P. Barringer
My clients who work at startup companies preparing for an initial public offering (IPO) are giddy with thoughts of the wealth and opportunities their pre-IPO stock compensation will provide. I try to set them straight with five financial-planning points that may help to manage their post-IPO expectations.

Your Company Is Going Public: How Your Stock Compensation May ChangeThis is premium content

Ryan Harvey and Bryan Smith
Podcast included! As privately held companies prepare for their market debuts, they make changes in their equity compensation programs beyond just stock options. This article looks at some of the shifts you can expect in your stock grants from the startup stage through the IPO and the post-IPO periods.

Drafting An Equity Incentive Plan For A Private Company: Issues Your Company ConsidersThis is premium content

Tristan Brown, Jennifer M. Wolff, and PLC Employee Benefits & Executive Compensation
Equity compensation is often a significant component of the total compensation paid to employees and other service providers. While some provisions of private company equity plans mirror the provisions in public company plans, in the private company context, equity compensation raises special concerns.

Pre-IPO Company Employees: Their Stock Option Tax DilemmaThis is premium content

Bruce Brumberg
The biggest surprise for employees with stock options at pre-IPO companies is often the amount of taxes they need to pay when their company goes public or is acquired. When they exercise their options after the IPO or as part of the acquisition, selling the stock at the same time, a large chunk of their proceeds goes to pay federal and state taxes. This article looks at ways to reduce this tax burden.

Understanding The Risks In Your Pre-IPO Stock Options (Part 1)This is premium content

Edwin L. Miller, Jr.
Employees in startup companies often have misconceptions about their stock options and restricted stock. Understand what could happen to your stock options or restricted stock in venture capital financings, in an acquisition, or in an IPO. Part 1 looks at M&A deals; Part 2 analyzes IPOs.

Understanding The Risks In Your Pre-IPO Stock Options (Part 2)This is premium content

Edwin L. Miller, Jr.
Stock options and restricted stock in pre-IPO companies can create substantial wealth, but you need to understand what might happen to your stock grants in venture capital financings, in an acquisition, or in an initial public offering. While Part 1 looks at venture financings and M&A deals, Part 2 analyzes IPOs.

Early-Exercise Options: Clarifying The Confusion And Risks (Part 1)This is premium content

David Cowles
Deciding whether to exercise now or later has always been difficult. It has become even more confusing with a twist at pre-IPO companies that allows you to exercise options immediately upon grant.

Negotiating And Structuring Your Stock Compensation (Part 2): Privately Held CompaniesThis is premium content

Alisa J. Baker
Podcast included! Part 1 looked at the problems of conflicting or inconsistent provisions among different documents. Part 2 discusses which existing documents and rules nonfounder executives must consider when negotiating for equity compensation during the early (pre-public) stages of a company's development and growth.

Techniques To Defer Or Reduce Taxes On The Sale Of Your Company's Shares (Part 1): QSB StockThis is premium content Editorial Staff & Contributors
UPDATES! Finding legal techniques to minimize taxes is almost as popular in the US as stock compensation. These sophisticated techniques with founder's stock and options can defer or reduce taxes.

Stomach Volatility In Your Company's Stock Without Losing Your Mind

Joanna Glasner, Matt Simon, and Bruce Brumberg
Don't feel anxious or discouraged about stock-price volatility. As the experts will tell you, equity compensation is a tool for building wealth over the long term.

Return to top of page

NEW! Has there been a tax-law change for stock options and restricted stock units (RSUs) in privately held companies?

Not yet. Currently, the tax treatment of options and RSUs in public and private companies is still the same. However, in September 2016 the House of Representatives in Congress passed the...

What are the top 10 questions I should ask about equity awards I receive at a privately held company?

Once you know the size of your grant, you must find out the following before you...

How do stock grants in privately held companies differ from those in publicly traded companies?This is premium content

The core concepts of equity compensation are similar. The tax treatment is also the same, even for shares that are restricted securities, which can present a tax dilemma. The differences include the following...

Why doesn't my employer offer me equity compensation?

If your employer is a for-profit corporation, it probably can offer stock options, restricted stock, or other types of equity compensation to its employees. There may, however, be many reasons why your employer is not offering stock grants...

UPDATES! How do privately held companies create liquidity for employees' options and stock, other than going public or getting acquired?This is premium content

Stock in privately held companies lacks liquidity, is not registered with the SEC, and usually has company-imposed contractual resale limits, so resales are difficult and need to follow the requirements of SEC Rule 144. Some private companies allow resales of stock by...

Why do some companies grant stock options that are immediately exercisable before they vest and are subject to a repurchase right by the company?

This is done mostly by startup and private companies. Early-exercise stock options allow you to exercise when the stock price is low and then start your capital gains holding period. The risk is that...

How do I value options and stock in a privately held company?This is premium content

Different methods can be used. The valuation of options and stock issued by private companies is more art than science. At least in the context of valuations for estate and gift tax purposes, the IRS has admitted...

Is a Section 83(b) election ever required for grants of stock or options in privately held companies?

A Section 83(b) election is applicable when a substantial risk of forfeiture exists in the underlying shares of an equity grant. In privately held companies, an 83(b) election is made upon...

Any survey data on stock grants in privately held companies?This is premium content

While it is hard to find data, we have located a few sources. The data and examples from the surveys summarized here show that...

How does a private company decide on the size of a stock grant? Any data on grant sizes?This is premium content

Unlike public companies or large private companies that may have grant guidelines, most private companies determine the grant size by a combination of factors. Surveys show that...

Return to top of page