Pre-IPO Equity Planning: How Do You Position Before Your Company Goes Public?

Erik James Roberts, Founder & Chief Investment Officer | Infinitus Wealth Management

1 day ago

8 min read

Erik James Roberts, Founder & CIO, Infinitus Wealth Management. Purple Heart recipient, Wharton MBA.

Updated September 20, 2026

Pre-IPO equity planning is the work of inventorying your stock options, RSUs, and shares, acting on the tax elections that have deadlines, and building a written sale and diversification plan before your company lists, ideally 12 to 24 months ahead. Done early, it puts you in control of three things most shareholders leave to chance: what you owe, when you owe it, and what your equity becomes after the opening bell.

The timing could hardly be better. The second quarter of 2026 saw 48 IPOs raise a record $104.8 billion, led by SpaceX's largest-ever offering, and Renaissance Capital's fall preview put year-to-date US IPO proceeds at $146 billion. A lot of employees, executives, and early investors are about to hold liquid wealth for the first time. The ones who arrive with a plan get to make decisions on their own schedule.

What Is Pre-IPO Equity Planning?

Pre-IPO equity planning is a coordinated review of your equity compensation, your tax picture, and your future portfolio, completed while the company is still private. It answers four questions: what do I own, which decisions have deadlines, what will I owe at the listing, and how does this position become a diversified portfolio?

The reason to do it early is simple. Before an IPO, share values are lower, elections are still open, and holding-period clocks can still be started. After the listing, many of those doors are closed and the rest are governed by lockups and trading windows. In my view, time is the single most valuable asset a pre-IPO shareholder has, and it costs nothing to use.

What Equity Do You Actually Own?

Start with a one-page inventory, because each type of equity is taxed at a different moment. Most pre-IPO holders have some mix of the following:

Incentive stock options (ISOs). No regular income tax at exercise, though the spread counts toward the alternative minimum tax. Shares sold more than two years after grant and more than one year after exercise receive long-term capital gains treatment on the full gain.
Non-qualified stock options (NSOs). The spread at exercise is ordinary income, with withholding. Growth after exercise is capital gain.

Restricted stock units (RSUs). Most private-company RSUs are "double-trigger," meaning they require both time-based vesting and a liquidity event. At the IPO, every time-vested unit can settle at once, and the full value is ordinary income.

Restricted stock and founder shares. Owned outright, often with vesting. These are the shares where an 83(b) election and QSBS status matter most.

For each grant, record the type, grant date, strike price, vesting schedule, expiration date, and the current 409A valuation (the independent appraisal private companies use to set option strike prices). Our guide to stock options, restricted stock, and deferred compensation covers the mechanics of each in more depth.

Which Decisions Have Deadlines Before the IPO?

Three decisions carry clocks that start, or expire, while the company is still private: the 83(b) election, the ISO holding periods, and the QSBS holding period. Each one rewards early action.

The 83(b) election. When you receive restricted stock or early-exercise unvested options, you have 30 days to file an 83(b) election with the IRS. It lets you recognize income on the value today, often a small number at a private company, so that future growth is taxed as capital gain. There are no extensions, and the election does not apply to RSUs.

ISO holding periods. Exercising an ISO starts the one-year clock toward long-term treatment. Exercising while the 409A value is close to your strike price also keeps the AMT spread small. The trade-off is real capital at risk in a private company, which is why this decision belongs in a model, with your CPA, before it belongs in a brokerage form.

Qualified small business stock (QSBS). Section 1202 can exclude a substantial amount of gain from federal tax if your shares qualify. The rules changed in 2025. For stock issued after July 4, 2025, the exclusion is 50% after three years, 75% after four, and 100% after five, while earlier stock still requires a hold of more than five years. For the newer stock, the per-issuer cap rose from $10 million to $15 million and the company gross-asset ceiling rose from $50 million to $75 million. Options do not count; the holding period begins when you own the shares. If you joined early, ask the company for a QSBS attestation letter now, while the records are easy to assemble.

Gifting and estate transfers. Shares moved to family or trusts before the IPO transfer at pre-IPO valuations. For 2026 the estate and gift exemption is $15 million per person and the annual exclusion is $19,000 per recipient. This is estate attorney territory, and the window is widest before the listing. See our overview of strategic wealth transfer and minimizing inheritance taxes for how these transfers fit a broader estate plan.

How Does the AMT Work for ISO Exercises in 2026?

The spread on an exercised ISO is added to your income for alternative minimum tax purposes, and the 2026 AMT rules are new. Knowing the numbers lets you size exercises deliberately across tax years.

For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly. The change to know is the phaseout: it now begins at $500,000 of AMT income for single filers and $1,000,000 for joint filers, shrinks twice as fast as before, and is fully gone at $680,200 and $1,280,400. In 2025, the joint phaseout did not begin until about $1.25 million.

Three planning points follow. First, a large ISO exercise is best modeled before it is made, since the 26% and 28% AMT rates apply to the spread once the exemption is used. Second, AMT paid on ISO exercises generally creates a credit that can be recovered in later years. Third, splitting exercises across calendar years can keep each year's spread inside the exemption range. Pre-IPO equity planning turns this from a surprise in April into a line item you chose.

What Happens to Your Taxes on IPO Day?

For double-trigger RSU holders, the IPO or the lockup release is the largest single income event of a career, and employer withholding usually covers only part of the bill. Planning for the difference in advance makes it a non-event.

Employers withhold federal tax on RSU income at the supplemental rate: 22% on the first $1 million and 37% above it. An executive already in the 37% bracket owes 37% on all of it.

Hypothetical illustration: $2,000,000 of RSUs settle at the IPO. Withholding is $220,000 on the first million and $370,000 on the second, or $590,000 total. At a 37% marginal rate, the federal tax on that income is $740,000. The $150,000 difference, before any state tax, is due through estimated payments or at filing. Setting that cash aside on day one, or arranging additional share withholding if your company allows it, keeps April quiet.

How Do the Lockup and a 10b5-1 Plan Shape Your Sale Strategy?

Most IPO shareholders cannot sell for roughly 180 days under a contractual lockup with the underwriters, and insiders remain subject to quarterly trading windows afterward. A Rule 10b5-1 plan, which is a written, pre-scheduled trading plan adopted when you hold no material nonpublic information, lets sales proceed on autopilot through those windows.

The cooling-off periods matter for scheduling. Officers and directors wait the later of 90 days after adopting the plan or two business days after the company reports results for that quarter, capped at 120 days. Other employees wait 30 days. A plan adopted shortly after the IPO can therefore have its first sale line up with the lockup release. Securities counsel drafts the plan. Our role is the investment logic behind it: how much, at what pace, and into what.

How Does Pre-IPO Equity Planning Turn One Stock Into a Portfolio?

The final step of pre-IPO equity planning is deciding, in writing and in advance, how much of the company you intend to keep and what the rest becomes. Decisions made before the first trading day tend to be calmer and better reasoned than decisions made while watching a ticker.

We frame it in three tiers. Commitments come first: taxes owed, a home, liquidity reserves. The core is the capital that funds your life for decades, and it belongs in a diversified portfolio. The conviction position is the amount of company stock you keep because you believe in the business, sized so that your lifestyle holds up whatever the share price does. Your paycheck, bonus, and unvested equity already depend on this one company, a dynamic we cover in managing risk when your income and stock are tied to one company.

This is where portfolio construction does real work. At Infinitus, the proceeds are built into a custom portfolio of individual stocks and bonds, drawing on our 12 proprietary strategies. Owning individual securities lets us build around the position you keep. If you retain a large technology holding, the rest of the portfolio can lean toward other sectors, dividend growers, and municipal bonds. Individual positions also create ongoing opportunities for tax-loss harvesting, where realized losses offset gains from staged sales of company stock. Gifting appreciated shares to charity, directly or through a donor-advised fund (a charitable giving account that accepts stock), can fund years of giving while removing embedded gains.

Who Should Be on Your Pre-IPO Team?

A strong pre-IPO team has four seats: a CPA with equity compensation experience, an estate planning attorney, securities counsel for the 10b5-1 plan, and an investment manager who builds the portfolio your equity becomes. If any of those seats is empty, Infinitus can introduce you to professionals we trust.

Heading toward a listing? We build custom portfolios of individual stocks and bonds for executives and shareholders turning concentrated equity into lasting wealth. Start a conversation with Infinitus.

Frequently Asked Questions

When should pre-IPO equity planning start?

Ideally 12 to 24 months before the expected listing. That window leaves time to start ISO and QSBS holding periods, spread exercises across tax years, and complete estate transfers at pre-IPO valuations. Starting later still helps; the withholding plan, sale schedule, and portfolio design can all be built in the final months.

Should I exercise my stock options before the IPO?

It depends on your strike price, the current 409A value, your AMT position, and how much capital you are comfortable committing to a private company. Early exercise can start holding-period clocks and reduce future tax, and it also puts real money at risk. Model it with your CPA before acting.

How are double-trigger RSUs taxed at an IPO?

When the liquidity trigger is met, all time-vested units settle and their full market value is ordinary income in that year. Employers withhold at 22% on the first $1 million of supplemental wages and 37% above it, which is often less than a top-bracket holder owes.

Can I sell shares during the lockup period?

Generally no. Lockups are contractual agreements with the underwriters, typically about 180 days, though some include early-release provisions. Your company's insider trading policy applies after the lockup ends.

Does my startup stock qualify for QSBS?

It may if you acquired shares directly from a domestic C corporation that was under the gross-asset ceiling at issuance ($50 million for stock issued on or before July 4, 2025, and $75 million after) and the business is in a qualifying industry. Ask the company for a QSBS attestation and confirm with your tax advisor.

How much company stock should I keep after the IPO?

There is no universal number. A useful test: size the position so that your long-term plan works at any share price. Many executives set a target percentage in advance and sell toward it on a schedule.

Disclosure: Infinitus Wealth Management is a registered investment adviser. Registration does not imply a certain level of skill or training. This article is for informational and educational purposes only and is not individualized investment, tax, or legal advice, nor an offer or solicitation to buy or sell any security. References to specific companies or offerings are factual context, not recommendations. All examples are hypothetical and for illustration only; they do not represent actual client results. Tax figures reflect federal law and IRS guidance for the 2026 tax year as of the date above and are subject to change; state taxes vary. Infinitus does not provide tax or legal advice; consult your CPA and attorney before acting. Investing involves risk, including possible loss of principal. Concentrated positions carry additional risk. Diversification does not ensure a profit or protect against loss. Past performance is not indicative of future results.