What to Do With Your Company Stock Before an IPO

The rumors have started. Maybe leadership mentioned “going public” at an all-hands, or a news story named your company as a likely IPO. Suddenly the equity you’ve been collecting for years might be worth real money, and you’re not sure what you’re supposed to do about it.

This is one of the most common conversations I have with clients right now. The months before an IPO are when you have the most choices, and many of those choices close once the company goes public. Waiting until the stock is trading usually means paying more tax and having less control over when you can sell.

Here is how I walk clients through it, in the order the decisions tend to come up.

Start With Your Plan Documents

Every equity grant comes with two sets of paperwork. The stock plan sets the rules for everyone at the company. Your award agreements set the terms for your specific grants. Most people skim these when they’re hired and never open them again.

Pull them out now and look for these details.

• What type of equity you hold. RSUs, ISOs, NSOs, or restricted stock each follow different tax rules.

• Your vesting schedule, including whether your RSUs are double-trigger and need an IPO or sale to vest.

• How long you have to exercise options if you leave, and when each grant expires.

• Whether early exercise is allowed, which lets you buy option shares before they vest.

• Transfer limits and buyback rights. Many private companies can buy back shares or must approve any sale.

• What happens if the company is acquired instead of going public, including whether unvested grants speed up.

Your stock plan portal, often run by a firm like Carta or Shareworks, will list most of this. If anything is unclear, your HR or stock plan team can answer questions about the terms, though they can’t give tax advice.

Learn the Terms of the Liquidity Event

A liquidity event is any moment when private shares can turn into cash. An IPO is the best known, but an acquisition or a tender offer can come first, and each one plays out differently.

If the company goes public

Double-trigger RSUs often vest at the IPO, and years of grants can count as income in a single year. Most employees then face a lockup period, usually around 180 days, before they can sell. Our guide to IPO lockup periods covers that stretch in detail.

If the company is acquired

The buyer might pay cash for your shares, swap them for its own stock, or convert your unvested grants into new ones. Some agreements speed up vesting if you lose your job after a sale. Your award agreement should spell out which applies.

If the company runs a tender offer

More private companies now let employees sell some shares before an IPO. In a tender offer, the company or an outside investor offers to buy a set amount of stock at a fixed price. You usually choose whether to take part, and there may be a cap on how much you can sell.

Know When You Can and Can’t Sell

Before an IPO, you usually can’t sell private shares on your own. Most companies restrict transfers or keep the right to buy shares first, which leaves tender offers and company-approved sales as the main ways to get cash.

After the IPO, the lockup sets the first window. Once it ends, your company’s insider trading policy still limits when you can trade, often closing trading in the weeks before each earnings report. A 10b5-1 plan, set up ahead of time, can sell shares on a fixed schedule even during those closed periods. Building a plan before the IPO gives you a head start on all of this.

Decide Whether to Exercise Options Before the IPO

If you hold stock options, the months before an IPO may be your last chance to exercise at a low price. The spread between your strike price and the share value is often smallest while the company is private, so the tax on exercising is smaller too.

Exercising early has real benefits.

• It starts your holding clock. For ISOs, holding the shares a year after exercise (and two years after grant) can turn the whole gain into a long-term capital gain.

• It can shrink the tax bill. Exercising NSOs at a lower value means less ordinary income. Exercising ISOs at a lower value means less exposure to the alternative minimum tax.

It also has real costs. You pay the strike price in cash, plus any tax, for shares you can’t yet sell. If the IPO is delayed or the company struggles, that money stays tied up or disappears. Our ISO vs. NSO guide explains how to size an exercise around the AMT so the tax bill doesn’t surprise you.

Check whether your shares qualify for QSBS

Stock in a smaller company can qualify for a large federal tax break under Section 1202, known as qualified small business stock or QSBS. The company must be a C corporation that met the size test when your stock was issued, and the holding clock starts when you own the shares, so exercising options starts it.

For stock issued after July 4, 2025, the rules got more generous. You can exclude 50% of the gain after three years, 75% after four, and 100% after five, up to $15 million or 10 times your basis. Older stock still needs a full five years and is capped at $10 million. QSBS rules are detailed, so confirm eligibility with your company and a tax professional before you count on it.

Plan for the Tax Bill

An IPO year often brings the largest tax bill of a person’s career. RSUs that vest at the IPO count as income, option exercises add more, and the shares may be locked up when the bill comes due.

Companies usually withhold tax on vested RSUs at a flat 22% federal rate, which is often too low for people in higher brackets. Our RSU, ISO, and NSO comparison explains how to close that gap. Before the IPO, estimate your full-year income, set aside cash, and plan any estimated tax payments so you aren’t forced to sell at a bad time to cover them.

Decide What the Stock Is For

Before the stock has a public price, decide what role it should play in your life. That answer will guide every sale you make later.

Start with a target. Many advisors suggest holding no more than 10% of your net worth in any single stock. If your company shares will be worth far more than that, plan to sell in stages after the lockup ends, tied to goals like paying off a mortgage, funding college, or building a cash reserve.

Pre-IPO is also a good time to look at gifting. Giving shares to family, a trust, or a donor-advised fund while their value is lower can move future growth out of your estate or set up a charitable gift. Gifts of private stock above $10,000 usually need a qualified appraisal, so involve your estate attorney and tax advisor early. Our framework for selling company stock can help you set that target.

A Pre-IPO Checklist

• Gather your stock plan, award agreements, and current vesting and exercise records.

• Find out whether your RSUs are double-trigger and what happens to them at an IPO or sale.

• Model the tax cost of exercising options now vs. later, including the AMT.

• Ask whether your shares may qualify for QSBS.

• Set aside cash for taxes on RSUs that will vest at the IPO.

• Pick a target for how much company stock you’ll keep after the lockup.

• Talk with your advisor and tax professional about gifting before the IPO.

Questions to Ask Before Your Company Goes Public

Should I exercise my options before the IPO?

It depends on your cash, your tax situation, and how confident you are the IPO will happen. Exercising early can lower your tax and start your holding period, but only use money you could afford to lose if the company never goes public.

Can I sell private company stock before an IPO?

Usually only through a company-approved route, such as a tender offer. Most private companies limit transfers or keep the right to buy shares first, so check your plan before agreeing to any outside sale.

What happens to my equity if the IPO gets delayed?

Your grants keep vesting on their normal schedule, but double-trigger RSUs may not settle until a liquidity event happens. Watch your option expiration dates, since options can expire before the company ever goes public.

What is a tender offer, and should I take part?

A tender offer lets you sell some private shares at a set price, usually to the company or an investor. Taking part can lower your risk and give you cash before an IPO, but you give up any gain above the offer price on the shares you sell.

Do I need to do anything if my company is acquired instead?

Yes. Read how your award agreement treats a sale, since unvested grants may speed up, convert, or be cancelled. The tax timing can also change, so plan as soon as a deal is announced.

Make Your Plan While You Still Have Choices

An IPO can change your finances for good. The decisions you make in the months before it shape how much of that change you keep.

At Life Story Financial, I help women with pre-IPO equity read their award agreements, model exercise and tax scenarios, and set a plan for the stock before the company goes public. If your company is heading toward an IPO, book a free intro call and we can go through your grants together.