Pre-IPO
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Pre-IPO

Pre-IPO

The content in this section 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 granted by private companies are the subject of Early-Exercise Options. Learn what an IPO may mean for your stock grants in Going Public.

Selected Articles

Basics

Stock Options & RSUs From Startup To IPO Or M&A: Top Financial Advisors Cover 5 Key Topics

Stock comp in private companies can be a financial rocket, but with rocketry comes rocket science. It's surprisingly complex. This article presents key points to know from financial advisors with expertise in financial and tax planning for equity comp in private companies.
Going Public

Initial Public Offerings: Leading Financial Advisors On Equity Compensation Planning

Video included! For private company employees with stock options, RSUs, and shares in the company, an initial public offering (IPO) presents unique planning circumstances. We asked financial advisors for their insights. Read their responses in their own words.
Going Public

Stockbrokers' Secrets: 5 Financial-Planning Insights For Equity Compensation At IPO Companies This is premium content

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.
Show More Selected Articles
Going Public

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

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.
Going Public

Private Company Stock Options And RSUs: SEC Filings By IPO Companies Reveal What To Expect This is premium content

Stock grants in privately held companies can be structured in surprisingly diverse ways, many of which are not commonly known. This article looks at stock plan details in the Form S-1 SEC registration statements of IPO companies to explain how stock options and restricted stock grants at private companies may be different and more complex than the standard types of grants used by public companies.
Going Public

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

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.
This is simply a selection of the many articles in this section.
Use the navigation to the left to explore all of the categories in this section.

Selected FAQs

Basics

Video included! What are the top 10 questions I should ask about equity awards I receive at a private company?

Once you know the size of your grant and the percentage of ownership it represents, run through the following checklist before you...
Basics

How do I value options and stock in a private 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...
Basics

How do stock grants in private companies differ from those in publicly traded companies?

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...
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Basics

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

Stock in private 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...
Basics

NEW! How does tax withholding work for private company stock compensation? This is premium content

Unlike with public company stock compensation, you cannot sell the shares at exercise or vesting to pay the tax withholding. Your company will have...
Basics

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...
Basics

In a private company, can restricted stock and stock option grants fully vest with a double trigger only when the company goes public or gets acquired? How is this taxed? This is premium content

Companies have flexibility in setting the conditions on which their stock grants can vest. This type of double-trigger vesting allows your company to base the vesting of your grant on...
Early-Exercise Options

What are early-exercise stock options that are immediately exercisable but for shares that must still vest and have a company repurchase right?

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...
Basics

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

Yes. The Tax Cuts & Jobs Act introduced a type of equity award that gives employees in private companies extra time to pay federal income tax on...
Early-Exercise Options

Should I exercise an option immediately to buy stock that is still subject to vesting and a company repurchase right? What is the risk? This is premium content

Early exercise gives employees who can pay the exercise price the opportunity to start their capital gains holding period early. If your plan permits this strategy, it makes sense in certain situations, such as...
Early-Exercise Options

Is a Section 83(b) election required when you receive a grant of stock or options in a privately held company?

A common misunderstanding is that a Section 83(b) election is required for grants in private companies or is available for any grants. A Section 83(b) election is available only when...
This is simply a selection of the many FAQs in this section.
Use the navigation to the left to explore all of the categories in this section.
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