Pre-IPO Planning: The 12-Month Checklist

A company going public is the biggest financial event of most tech employees' lives. Almost every meaningful move happens in the 12 months before the S-1 filing, not after. This guide walks through what to do at each stage — and what becomes irreversible once lockup starts.

12 months before IPO

Inventory your position

Build a spreadsheet with the following for every grant you hold:

• Grant date, grant type (ISO / NSO / RSU / early-exercise shares)
• Strike price (for options)
• Vesting schedule and remaining unvested
• Current 409A valuation (from your company)
• Fair market value assumption for IPO

Most pre-IPO employees have grants from multiple years at different 409A prices. Treating them as one pool is the first planning mistake.

Decide on exercise strategy for ISOs

If you have unexercised ISOs, the 12-month mark is when to seriously model exercise-and-hold. Reasons:

• Exercising early starts the 1-year long-term capital gains holding clock AND the 2-year-from-grant ISO qualifying clock. Finishing both before sale qualifies for long-term capital gains treatment (15–20% federal) instead of ordinary income (up to 37%).
• AMT is triggered when you exercise ISOs and hold. The AMT is recoverable in future years via the AMT credit, but you pay it now.
• If you exercise 12+ months before IPO, you can complete the holding period right around the lockup expiration — a common sweet spot.

This decision requires modeling 3–5 years of taxes, not one. Generalist advisors will not do this correctly.

Consider 83(b) election for early-exercised NSOs or restricted stock

If your company allows early exercise on unvested options, filing an 83(b) within 30 days of exercise can lock in tax at today's tiny FMV instead of future IPO valuation. Massive leverage. Must be filed on time — paper form, certified mail.

6 months before IPO

Tax-bracket and estimated-tax planning

Your IPO year will likely be your highest-income year ever. Plan around it:

• Max your 401(k) and HSA early in the year; you probably won't have room later.
• Consider backdoor / mega backdoor Roth contributions before Q4 income potentially blocks other strategies.
• Set aside 10–15% of projected IPO-year supplemental income for the April tax bill. The 22% federal supplemental will not cover a 40%+ marginal rate.
• If you'll itemize in the IPO year, bunch deductions (charitable giving, property tax prepayments where legal) into that year.

Evaluate QSBS eligibility

Qualified Small Business Stock (IRC § 1202) — post-OBBBA rules (for stock issued after July 4, 2025):¹

• C-corporation (not LLC or S-corp) at time of issuance
• Company gross assets under $75M at time of issuance (up from $50M pre-OBBBA)
• Tiered exclusion: 50% of gain excluded if held 3 years, 75% if 4 years, 100% if 5+ years
• Exclusion cap: greater of $15M or 10× adjusted basis (up from $10M pre-OBBBA)
• Original issuance (not secondary purchase)

Pre-OBBBA stock (issued on/before July 4, 2025) retains the older $10M/$50M caps and mandatory 5-year holding period.

If your early ISO exercises or founders-equity shares qualify, you potentially skip $10M of federal tax. Check with a tax specialist — the rules are nuanced and your employer will not volunteer this analysis.

3 months before IPO

Set up a diversification plan

Decide in advance what you'll sell, when, and why. Waiting until the stock is liquid to "see how it trades" is a behavioral trap — loss aversion ensures you hold longer than you should.

Common plans:

• Immediate diversification: sell 30–50% the moment lockup expires, regardless of price.
• Gradual sell-down: pre-set quarterly sales of 5–10% of position over 2–3 years, scheduled via 10b5-1.
• Exchange fund: contribute concentrated stock to a fund pooled with other concentrated holders; gets diversified basis in exchange for a 7-year lockup.

10b5-1 plan setup (if insider)

Executives, directors, and employees with access to material non-public information need 10b5-1 plans to sell. Recent SEC amendments require cooling-off periods (30 days for non-executives, longer for execs and directors). See the 10b5-1 guide for setup details. The plan must be in place before you have visibility into the IPO pricing process, or the affirmative defense it provides doesn't hold.

1 month before / S-1 filed

Lockup and blackout behavior

From S-1 filing through IPO day, you're typically in a blackout. Even after IPO, a 180-day lockup usually applies to employees. Do not make irreversible financial decisions based on projected post-IPO proceeds that haven't materialized yet.

Do NOT

• Buy real estate contingent on post-IPO wealth. If the IPO delays, prices drop, or lockup extends, you're in trouble.
• Leave your job just before IPO. Most companies require continued employment through IPO date for acceleration; some require through lockup expiration.
• Exercise more ISOs right before IPO hoping for long-term treatment. You won't hit the 1-year-from-exercise clock before lockup ends; you'll pay ordinary income rates.

After IPO (first 18 months)

Execute the plan you already made

Sell according to your pre-IPO decisions, not based on how the stock has traded. The entire point of having a plan was to avoid post-liquidity decision-making under behavioral pressure.

Tax-loss harvesting if stock drops

If the stock has dropped since vest, you may have harvestable losses even if you're ahead at the position level. Specialist advisors track this.

Sources

1. Holland & Knight — OBBBA Section 1202 Changes (effective July 5, 2025).
2. IRC § 422 — Incentive Stock Options; § 56(b)(3) AMT preference.
3. IRS — 83(b) Election (30-day filing window).
4. SEC Release 33-11138 — Rule 10b5-1 Amendments. 90/180-day cooling-off.
5. 2026 AMT Exemption & Phaseout (OBBBA $140,200 MFJ, $1M phaseout start at 50% rate).

Pre-IPO planning changed materially under OBBBA (July 2025) — QSBS expansion + AMT phaseout tightening. Verify stock-issuance date when assessing QSBS eligibility.