PRE & POST IPO TAX STRATEGY
Tax Strategy Before and After Your Company Goes Public
Multi-year tax strategy for founders, executives and employees, from pre-IPO planning through lockup, liquidity and the years that follow.
THE OPPORTUNITY
The largest tax decisions surrounding an IPO are made before the company goes public, when share prices are low, elections are still open and holding periods have not yet begun. Once the stock trades, many of those options close.
Natalie builds a multi-year strategy around what you are optimizing for: minimizing total tax, managing AMT, diversifying a concentrated position or reaching a stated liquidity goal within a defined timeframe. Projections are updated and refined quarterly, so each decision is made with its effect on the years ahead in view.
She coordinates closely with your wealth advisor and estate attorney, so the tax strategy and the broader plan move together.
WHAT WE PLAN
The decisions that shape the outcome
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Pre-IPO exercise strategy. Exercising while the value is low can start holding periods early and keep AMT manageable, with the cash at risk weighed against the tax saved.
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83(b) elections and QSBS. Founder’s stock and early-exercised shares are positioned so the clock starts on day one and the federal QSBS exclusion remains available.
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ISO and AMT sequencing. Exercises are sized to each year’s AMT room, with credit recovery planned for the years that follow.
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RSU vesting at listing. Income, withholding and estimated payments are projected for the vesting spike, so April holds no surprises.
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Lockup and sale planning. Lot selection, holding periods and trading-plan windows are mapped before shares can be sold.
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Concentrated position strategy. Diversification is staged across tax years to manage brackets, the Net Investment Income Tax and gains.
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Charitable planning. Appreciated shares given to a donor-advised fund in a high-income year can deliver a deduction at your top rate and avoid the gain entirely.
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California and multi-state. Residency and the sourcing of equity income are planned before a move, not after, since California taxes the portion earned while working here.
HOW WE PLAN
Every stage of the IPO, planned in sequence
BEFORE THE IPO
Early exercises, 83(b) elections and QSBS holding periods are planned while the spread is small, so more of the eventual gain qualifies for long-term or tax-free treatment.
AT THE IPO & THROUGH LOCKUP
RSUs that vest at listing often create a large income spike with too little withheld. We size estimated payments and the cash reserve before the date arrives, not after.
The months before shares can be sold are used to plan which lots to sell first, how to sequence ISO dispositions and how to stay within safe harbor.
AFTER LIQUIDITY
Diversification, charitable giving through donor-advised funds, California residency and a multi-year plan for the remaining shares, each modeled before you act.
Each move is chosen for what it sets up next.
WHY CLIENTS CHOOSE NATALIE C. PAPAGNI, CPA
One strategist, from the first exercise to the final sale
The best time to plan for an IPO is before the date is set. The second best is now.
Planned as one. Equity, income, charitable goals and your personal return are modeled together, so no decision is made in isolation.
Direct access to the principal. You work with Natalie from the first conversation through every return, with time-sensitive questions answered before the window closes.
QUESTIONS & ANSWERS
Pre & Post IPO tax questions, answered
When should IPO tax planning start?
Ideally a year or more before the listing. The most valuable moves, like early exercises, 83(b) elections and starting the QSBS holding period, are open only while the share price is low and the company is private.
Should I exercise my ISOs before the IPO?
Often, in part. Exercising while the spread is small limits AMT and starts the clock on long-term treatment. How much depends on each year's AMT room and the cash you're willing to commit, so it's modeled before you act.
What is an 83(b) election, and when does it matter?
It lets you be taxed on restricted or early-exercised shares when you receive them, rather than as they vest. Made within 30 days, it can turn future growth into long-term gain and start the QSBS clock early.
Can my IPO gain qualify for QSBS?
Shares of a qualifying C-corporation held for the required period can exclude much of the gain from federal tax. California doesn't follow QSBS, so the state tax is planned separately.
Why do I owe tax when my RSUs vest at the IPO?
Vesting is taxed as wages at that day's price, and the flat withholding rate falls short for high earners. The vesting income is projected and estimated payments set, so April holds no surprise.
How should I sell after the lockup ends?
With a multi-year plan. Spreading sales across tax years, pairing gains with charitable gifts and timing them around California residency can lower the total tax on a concentrated position.
Why do ISOs, NSOs and RSUs need tax planning?
Each is taxed on its own schedule. RSUs are taxed at vesting and NSOs at exercise. ISOs may not be taxed until sale, but the AMT can apply in between. Without a plan, income lands in your highest-tax years, withholding falls short and elections lapse. With one, each exercise and sale is timed so every year's tax is one you chose.
How do I know which ISO lots to exercise, and when?
Each lot is weighed on its spread, its expiration date and where you expect the share price to go. Lots with a small spread use little AMT room and often go first, and lots nearing expiration move up the list. Each year's exercise is sized to that year's AMT room, so the plan spreads across several years.
What is the AMT, and why does it apply to ISOs?
The alternative minimum tax is a second, parallel tax calculation. When you exercise ISOs and hold the shares, the spread is ignored for regular tax but counted for the AMT, so a large exercise can create tax with no sale to fund it. Much of that AMT comes back as a credit in later years, and the recovery is planned at the same time.
"If you are a professional earning RSUs and bonuses, have multiple income streams, complex investments and rentals and haven't received the tax planning expertise you need to feel comfortable you aren't overpaying taxes, you need to call Natalie. In short order, Natalie will develop a plan and projections that will cut wasted tax dollars and keep you on track to achieve your year-end targets."
M. & L. Ottosson
Professionals and Executives - Equity Compensation Tax Planning
San Francisco Bay Area
★★★★★