Founders and early employees often start thinking about financial planning when the IPO feels real — an S-1 is being drafted, bankers are circling, the internal buzz shifts. By then, several of the most valuable planning moves are already harder to execute or off the table entirely.
Take estate planning. Pre-IPO shares may qualify for a discount for lack of marketability that vanishes once the company is public. Transferring those shares into a GRAT or gifting them directly while that discount exists means you're moving assets at a fraction of what they may be worth post-listing. If the stock appreciates after the IPO, that growth happens outside your taxable estate.
Then there's the exercise decision. If you hold ISOs, exercising before the IPO starts the clock on long-term capital gains treatment and locks in the taxable spread before a potential IPO revaluation. But the AMT hit can be substantial — you're paying tax on paper wealth before you can sell. If the stock price drops post-IPO, you may have paid AMT on a value that no longer exists (though you do get AMT credits to recoup in future years). Spreading exercises across two calendar years can reduce the AMT spike, but that requires enough runway before the listing.
And once the company goes public, your flexibility around selling shrinks. A 10b5-1 trading plan — which allows insiders to sell on a preset schedule — requires a cooling-off period of 90 to 120 days for officers and directors before the first trade executes. If you don't adopt one during your first open trading window, you may not be able to sell until months after lockup expires.
The planning window is short and it doesn't reopen. The best time to start is before the S-1, not after.
For educational purposes only. Not tax, legal, or investment advice.