Pre-IPO Financial Planning Checklist For Employees

2026 is shaping up to be a major year for IPOs, with SpaceX, Anthropic, OpenAI, Databricks, Canva and Stripe all reportedly planning to go public. For many current and former employees with equity, it will be their first experience owning stock in a company as it goes public. With so many irreversible decisions to make around a major liquidity event, getting it right the first time is a must. This pre-IPO financial checklist is a guide for employees looking to manage their stock options or RSUs before an IPO.

Get Ready For The IPO Well Before The Opening Bell

If your employer (or former employer) is going public, you’ve likely searched online or turned to AI for guidance on what an IPO means for employees with stock or what to do with your options before a liquidity event. AI can help, but it lacks experience navigating sudden wealth in an IPO. Here’s a planning checklist from a financial advisor who specializes in stock options and pre-IPO planning.

Pre-IPO Equity Planning Checklist

• Organize and inventory your stock grants and understand what you have
• Find a financial planner and tax advisor who actually understands stock options and equity compensation.
• Consider pre-IPO exercises and tender offers, and start thinking about how and when you will sell stock after the lockup or earlier liquidity windows.
• Understand how taxes work and ways to reduce tax on stock sales (and the trade-offs).
• Consider all the ways you can diversify before, during and after the IPO.
• Inventory your financial assets outside of your pre-IPO shares and quantify your financial needs and goals.

Getting Organized Before The IPO

Many pre-IPO employees with equity have no idea what type of equity they have, never mind key details about how many shares have vested and the risks of exercising options right before an IPO.

So step one is to get organized. Log into the company’s equity management platform to view your grants. Consider making your own spreadsheet, even if it’s basic. Note the equity type; number of shares granted, vested, excisable and exercised; the strike price; and current value (409a). Download all the documents for each grant, label them and save them in a secure spot. Sometimes documents are located in multiple places on the website — for example, grant agreements in one place and tax forms from exercising incentive stock options in another. As the IPO nears, most companies will move to a new stock management platform.

These resources can help if you don’t already know the difference between an incentive stock option and nonqualified stock option or a restricted stock unit and common stock.

Finding Advisors Who Actually Understand Equity

Many financial advisors and CPAs simply aren’t experienced with equity compensation. The magnitude of this year’s IPO class may tempt some generalists to rebrand. As a financial planner specializing in pre-IPO stock planning, educating employees about the complex and nuanced tax rules — and the high cost of uninformed decisions or poor advice — is key.

After the IPO, you’ll also need help unwinding a concentrated stock position, investing proceeds from stock sales, exercising options, navigating the lockup and figuring out what this means for you financially, among many other things. If your advisory team doesn’t deal with stock options, RSUs and other forms of equity all the time, there’s a real risk something will be missed.

Because this is a niche practice area, consider expanding your search outside of your direct geographic area. This is an area where AI might be helpful, using detailed prompts about exactly what you’re looking for (and not looking for) and running it through multiple LLMs to arrive at a short list of firms to research then contact.

Finally, when building your team, take the long-term view and appreciate the ways an IPO might change your financial situation forever. A major liquidity event requires a different level of sophisticated planning and assistance from professional advisors (including an estate planning lawyer), well beyond the year or two around the IPO. Ideally, you can find a team that meets your needs now — and in the future.

Exercising Options, Tender Offers And Post-Lockup Sales

Exercising stock options as an early employee can be a great way to build wealth if the company is a success. But as pre-IPO companies mature, this gets much more difficult. And exercising options in the weeks or months leading up to an IPO can be particularly risky and cash intensive.

When you have incentive stock options, exercising early might ultimately save money in taxes. But it could also leave you with a big alternative minimum tax bill without any liquidity to pay it. Most employees of private companies must pay cash to exercise options, whereas public companies may offer cashless and net exercises. Another consideration is risk tolerance. A same-day sale (or net exercise) means you have all the facts and figures before moving ahead. This is only the beginning, so it’s important to speak with a CPA and financial advisor.

If you have the opportunity to sell shares in a tender offer before the company goes public, consider the pros and cons. IPOs are notoriously volatile, and the details about the lockup period may be pending, so you don’t know when you’ll have liquidity — and at what price. Taking some profits before the IPO can help you diversify, or it could give you cash to exercise shares or pay a looming tax bill. It doesn’t always make sense, but it’s something to discuss with your advisory team.

In an IPO, employees tend to anchor to the last 409a valuation or IPO price. This can have damaging wealth effects and undermine a prudent diversification plan. There are too many unknowns to develop a concrete sales plan before an IPO or during a lockup, but it’s an optimal time to start considering different outcomes and developing a framework for once you can sell. This should include factors like risk tolerance, your overall level of concentration, liquidity needs, taxes, and financial goals.

Pre-IPO Tax Planning And Reducing Tax On Post-IPO Sales

As discussed above, if you have stock options, nearly every decision you make will involve taxes, either under the regular system or the alternative minimum tax (or both). If you have restricted stock units (RSUs), most private pre-IPO companies (SpaceX being a notable exception) require double-trigger vesting, with the second trigger a liquidity event like an IPO. So when the company goes public, it’s an unavoidable tax bomb.

Investors with a concentrated position are often hesitant to diversify because they don’t want to pay taxes. But unless you have qualified small business stock, you can’t sell your shares tax-free. The main exceptions are if the stock loses value and with it your gains or if your heirs receive a step-up in cost basis—neither of which is the outcome you’re hoping for.

A discussion of the ways to reduce tax on stock sales is outside the scope of this checklist, but the point is: when managing your equity and planning a diversification strategy, don’t let the tax tail wag the dog. As part of your pre-IPO planning checklist, understand how taxes work in different exercise/sale situations. Ask your advisors about potential residency changes, tax rules, and strategies like direct indexing to manage taxes. But just don’t let that be the main driver in your decision-making process.

Diversifying A Concentrated Stock Position

Speak with your financial advisor about strategies to diversify out of a concentrated position. If you’re a current employee, you’ll likely have fewer options than former staffers do when the lockup ends. As part of your pre-IPO planning process, consider ways to reduce your overall risk and concentration around the pre-IPO shares. For example, you could exclude or underweight that sector or industry from your other investments or increase your fixed income allocation.

As these mega-cap IPOs are fast-tracked into the Nasdaq 100 and other major indices, check whether your index funds and ETFs also hold the stock—you may own more of it than you realize.

Integrating The IPO Into Your Full Financial Picture

The IPO seems like the main event, but it’s irrelevant without considering the rest of your financial picture, both now and where you want to be. Quantify your financial needs (upcoming tuition payment or AMT bill) and goals, like figuring out how much you need to retire early or superfunding a college savings account. Track your expenses and any planned lifestyle changes, including major purchases. This data is critical to help determine how aggressive your sales plan needs to be (at least at the beginning) and to map and project what might be possible financially after the IPO.

Kristin McKenna, CFP®, is the President of Darrow Wealth Management and a Forbes contributor. Examples in her articles are generic, hypothetical and for illustration purposes only and should not be misinterpreted as personalized advice of any kind or a recommendation for any specific investment product, financial or tax strategy. This general communication should not be used as the basis for making any type of tax, financial, legal, or investment decision. If you have questions about your personal financial situation, consider speaking with a tax and financial advisor.