Example: You’re expecting your company to go public in the next twelve months, and your equity compensation is primarily in the form of incentive stock options (ISOs).
You’re looking for guidance on how to start the clock on long-term capital gain treatment while being mindful of the potential alternative minimum tax (AMT) liability of exercising and holding.
Solution: We’ll review your expected income sources and quantify the thresholds for how many ISOs you can exercise before creating an AMT liability.
We’ll then review the tradeoffs of paying AMT vs. exercising up to the threshold based on your personal situation, factoring in cash flow and liquidity limitations.
We’ll determine a plan of action and adapt based on updates to your company’s share price and liquidity event timeline.
Example: Your company stock is already publicly traded, and you have a combination of ISOs and RSUs.
You’re trying to figure out when and how much of your equity to sell in order to diversify.
How will you invest the proceeds? How can you use your proceeds to build towards your various goals, including financial independence?
Solution: We’ll help you understand your concentration risk, given your current diversified assets. We’ll develop a strategy for reducing your concentration risk to an acceptable level given your path to financial independence based on the current value of your equity.
Once your concentration risk has been reduced to an acceptable level, we’ll develop a tax planning strategy to maximize the value of your ISOs. By quantifying where you are on your path to FI, we can talk through the tradeoffs of diversifying.
Example: You’re an early employee of a successful startup. You’ve recently been notified of a tender offer for a portion of your accumulated equity.
While the tender offer represents a substantial windfall, you’re unsure if you should accept it, given the discount to the 409A valuation and the potential for future appreciation. How do you go about making a decision that will minimize regret?
Solution: We’ll help you understand your overall financial situation and the impact accepting a tender offer would have on your path to FI (or other goals).
We’ll help you understand the opportunity cost of accepting or declining your tender offer. For example, do you have valuable tax-deferred accounts (after-tax 401k, for example) that you could be taking advantage of with the proceeds of a tender offer?
Do you have high-interest rate debt you could pay down? How concentrated are you in your company’s stock?
By understanding your unique personal financial situation, we’ll help you develop a strategy to minimize regret when making these high-stakes decisions.