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
What Does an IPO Mean for Stock Options? What Happens to Employees When a Company Goes Public
Whether you work for a private company about to IPO or one that’s recently gone public, you may wonder what that means for employees and their stock options. Financially, what an IPO means for current and former employees mostly depends on when you were hired. For early-stage employees and founders
Qualified Small Business Stock: The Section 1202 Gain Exclusion
If you invested in a startup or small business (founders, employee exercise of stock options, business owner), you need to know about qualified small business stock. If eligible, you may be able to exclude up to 100% of the gain from federal taxes when you sell your shares through the
What Happens to Your Stock When a Company is Bought?
If your company (e.g. the target company) is getting acquired, you’ll want to understand what happens to your stock. When a company buys another company, what can happen to your stock depends on several factors, including if you own stock outright or vested/unvested stock options/RSUs. Here’s more on what happens
83(b) Election: Tax Strategies for Unvested Company Stock
For founders, employees, and executives with stock-based compensation, an 83(b) election can be a powerful tax planning tool. When you make an 83(b) election, you’re opting to pay tax on unvested shares now, instead of when the stock vests. Most tax planning strategies focus on deferring tax, but an 83(b)