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Pre-IPO

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.



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Stockbrokers' Secrets: Financial Planning For Equity Compensation At IPO Companies This is premium content

W.E.B. Bantling
NEW! My clients who work at 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.

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

Tristan Brown, Jennifer M. Wolff, and PLC Employee Benefits & Executive Compensation
NEW! 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.

Your Company Goes Public: How Your Stock Compensation May Change This is premium content

Ryan Harvey and Bryan Smith
As privately held companies prepare for their market debuts, they make changes in their equity compensation programs. This article looks at some of the shifts you can expect in your stock grants both during the period leading up to your IPO and after your company goes public.

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

Bruce Brumberg
NEW! 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.
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 Companies This is premium content

Alisa J. Baker
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 Stock This is premium content

myStockOptions.com Editorial Staff & Contributors
UPDATED! 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 and Bruce Brumberg
Don't be discouraged by stock market volatility and underwater stock options. As the experts note, stock grants are tools for building wealth in the long term.

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What are restricted securities? Do they differ from restricted stock?

Don't confuse restricted securities and restricted stock. They are very different...

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...

How do private 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...

What is a "repurchase right"? This is premium content

A repurchase right is a company's contractual right to buy from an employee any stock resulting from the exercise of a stock option or other stock grant. The repurchase right can be exercised by your company even if...

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...

How do pre-IPO and other private companies determine exercise prices? This is premium content

At pre-IPO and other private companies, boards of directors usually determine exercise prices for stock options. They base them on the stock's fair market value. Methods for valuation include...

NEW! Why would a privately held company grant RSUs and not stock options? This is premium content

There may be several reasons. With restricted stock units (RSUs), the company grants fewer shares, as RSUs are always...

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