Stock Option and Pre-IPO Planning
Stock Option and Pre-IPO Planning
Darrow Wealth Management specializes in helping individuals at public and private companies with their stock options and equity compensation. If you’re an employee (or former employee) at a pre-IPO company going public, merging, or getting bought out, work with an advisor experienced with strategic stock option planning, tax implications, and strategies to best manage sudden wealth.
Clients include executives and founders who have a variety of equity compensation, including:
- Incentive stock options (ISOs)
- Nonqualified stock options (NQSOs)
- Restricted stock awards (RSAs)
- Restricted stock units (RSUs)
- Founders shares
- Profits interests
- Employee stock purchase plans (ESPPs)
Many clients have a combination of common shares, exercisable options, and equity subject to vesting. Through our ongoing advisory relationship, we’re able to help clients with the entire equity compensation lifecycle from even before a grant to long after the sale.
Nationally Recognized Wealth Advisor in Stock Compensation
Selection of media appearances by Kristin McKenna CFP®, President of Darrow Wealth Management and a nationally recognized specialist in employee stock options and equity compensation.
Publications above reflect media organizations that have quoted and/or published articles authored by Kristin McKenna and should not be misconstrued as a current or past endorsement of Kristin McKenna, Darrow Wealth Management, or any of its advisors. Please refer to the media page for more information and links to published works.
Financial Advisor for Employee Stock Options
Especially for founders and early employees, stock options can create a major liquidity event that transforms your financial life. To maximize the opportunity, it’s critical to get the right team of advisors in place before making irreversible decisions with your shares.
Our team of stock option advisors can work to help current and former employees and shareholders of public or pre-IPO companies:
- Plan for an IPO (or SPAC and direct listing) or acquisition (pre-IPO tax planning and exercise strategies, public or private acquisition planning)
- Develop an exercise strategy to balance potential tax benefits with risks of holding a concentrated stock position
- Assist with identifying and tracking shares likely to qualify for the tax-free sale of qualified small business stock
- Plan a tax-conscious liquidation strategy, considering different grants, holding periods, and outside cash needs
- Plan and execute a trading strategy including price targets, market vs limit orders, using options for long shares, considering liquidity constraints due to trading volume, liquidation order, and so on
- Assess ways to hedge the risks of a concentrated holding in publicly-traded stock, such as the use of call options on long shares, if permitted
- Assist in the drafting of 10b5-1 plan provisions
- Decide on a strategy to best use the proceeds, including funding multiple goals and investment management services to help you diversify sudden wealth
- Understand how vested and unvested stock options may be treated if you leave the company or retire
- Explore cashless or sell-to-cover exercises of stock options
- Approach employment negotiations around stock options and equity compensation
- Implement a multi-year diversification strategy through an ongoing wealth management advisory relationship
- Consider ways to further your charitable or legacy goals through different investment or trust vehicles
- Coordinate the approach with your tax advisor and estate planning attorney
Wealth Management Services
Darrow Wealth Management is a fee-only financial advisory firm and full-time fiduciary.
The Darrow Private Wealth Management Program offers clients a complete solution to their asset management and comprehensive financial planning needs.
Stock Option and Pre-IPO Planning Related Articles
83(b) Election for Stock Options and Restricted Stock
For individuals with stock-based compensation, an 83(b) election has the potential to greatly reduce taxes on stock options or restricted stock. When you purchase unvested stock compensation and make the election, you recognize the taxable gain now (if any), instead of when the shares vest. What is an 83(b) election?
What Happens to Your Stock Options When You Quit or Leave the Company?
What happens to employee stock options or equity compensation if you leave the company? Before giving notice, understand how vested and unvested stock options and restricted stock units are treated if you quit, retire, or leave the company for other reasons. In brief, here’s what usually happens to stock options
What Is An Early Exercise of Stock Options?
If you work for a private startup, you may be able to exercise your stock options early. Early exercisable stock options means you can exercise your option to buy the stock before the vesting date. When should you exercise an option early? In the right situations, early exercising stock options
Exercising Stock Options
When’s the best time to exercise your stock options? With stock options, employees have the right (not obligation) to buy the shares. When you exercise your stock options you purchase company shares. Though early exercises are possible, the default setup is for employees to first have the options to exercise