Participating in Sale/IPO of Company Stock

Holding equity in company that has a successful exit can be highly lucrative. However, your decisions around your equity can have a significant financial impact.

  1. Potential Direct Financial Impact

    • Potential liquidity event from an equity cash-out or stock conversion of vested shares.
    • Potential tax implications resulting from any immediate vesting, exercise, or sale of equity.
    • Complexity and costs associated with triggering the Alternative Minimum Tax (AMT).
    • Potential tax savings if you had previously exercised any stock options when they vested (or filed an 83b election) and meet the long-term holding requirements.
    • Potential limitations on when you can sell your company stock as a result of a 10b5-1 restrictions or lockup period.
  2. Potential Secondary Impacts

    • Incremental tax obligation of exercising vested options or selling shares as part of the deal pushes you into the next marginal tax bracket.
    • The need to gradually diversify your holdings away from a concentrated stock position.
    • Opportunities to set up a tax-advantaged trust to benefit future generations and/or create a donor advised fund to tax effectively give to charity over multiple years.
  3. Self Completion/Execution Risks

    • Exercising stock options could create an income tax liability without any cash proceeds.
    • Immediate vesting of more than $100k of ISOs as part of a transaction may cause you to lose your preferable tax treatment.
    • Not understanding how an immediate vesting of your options as part of the deal could affect the tax treatment.
    • Not setting aside funds to cover taxes if shares are not withheld by your company to cover taxes.
    • Concentrated stock holdings can expose you to a tremendous amount of volatility and risk.
    • Missing out on significant tax savings by not exercising your options early and not meeting the long-term holding requirements from grant and exercise before the company exits.
  4. Situations Where Expertise Adds the Most Value

    • Tax Adviser
      Working with a tax adviser may help to evaluate tradeoffs between any payout options presented as part of the deal (equity exchange or cash).If you continue to hold company stock, a tax adviser may be able to help you put a strategy in place to maximize the value of your shares and minimize the potential tax consequences by spreading the realized gains out over several tax years.
    • Legal Adviser
      Consulting a trust and estate attorney can be advantageous if your equity makes up a large percentage of ownership in the company and/or if you anticipate there may be significant long-term appreciation. Transferring your company stock to a trust while the market value is lower could significantly reduce any gift transfer taxes and/or reduce your tax liability now and later if donated to a charitable trust.
    • Financial Adviser
      Working with a financial professional can help you consider sale options and to invest a lump sum of cash received from the sale or to gradually diversify away from a concentrated stock holding may help reduce your investment risk. Additionally, a financial adviser may also be able to help you determine the role your equity or cash proceeds may play in your overall financial plan.

Harness the full potential of your wealth

We blend deep expertise, sophisticated technology, and personal service to identify strategies that unlock value and pair you with advisers that turn those strategies into reality.


Working with us

We’ll start by working with you to create a personal balance sheet and current financial outlook. From there, we present a curated list of Financial Advisers, CPAs, and Trust & Estate Attorneys from which you can choose.