Startup IPO or Acquisition: Tax and Financial Planning

The tax consequences of equity decisions before and after an IPO event or acquisition can be substantial, and expert help can make sure you’re maximizing your financial benefit and minimizing unnecessary costs.

What you need to do

Key steps to consider, what to watch out for, and ways advisors can help you understand how to make the most of your equity.

  • Document Inventory

    The equity grant you signed years ago, the 83b election you filed at a previous job, or timing of certain company and personal events can all significantly affect your tax bill.

  • Decide to Exercise, Sell, or Forfeit

    Depending on whether your shares have vested, the types of options or grants, and your tax bracket, there may be a few trigger points at which it makes more sense to exercise vs. sell vs. forfeit a certain number of sharesk.

  • Calculate Tax Credits

    Equity events can have an impact not only on your current year’s taxes but in future years as you receive rollover credit or spread the realized gains out over several tax years.

Common Mistakes

  • Inaccurate calculation of equity value
  • Under-budgeting for taxes
  • Having too much concentrated risk in your portfolio

How can advisors help?

Find Your Advisors
  • Certified Public Accountant (CPA)

    Tradeoff Assessment

    Evaluate tradeoffs between any payout options presented as part of the deal (equity exchange vs. cash) and at what timing (now vs. later).

    Strategic Timing

    File taxes strategically over multiple years in order to maximize the value of your shares and minimize the potential tax consequences.

  • Trust & Estate Attorney

    Founders and Investors

    Consult an attorney 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 to a Trust

    Transfer your company stock to a trust while the market value is lower and you could significantly reduce any gift transfer taxes and/or reduce your tax liability now and later if donated to a charitable trust.

  • Financial Advisor

    Investment Strategy

    Decide how to invest a lump sum of cash received from the sale and plan to gradually diversify away from a concentrated stock holding to reduce your investment risk.

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