Initial Public Offering Tax Planning

Suppose your business is planning to go public, whether through an IPO, a SPAC, or a direct listing, you have a lot of considerations to make. The decisions you make in the following weeks and months will have a long-term economic effect on you. As you begin your initial public offering tax planning, use this checklist as a starting point to ensure you’re taking the measures necessary to make the most of this once-in-a-lifetime opportunity.

What Is IPO Planning Process

The IPO Process is when a previously unlisted firm sells new or existing securities for the first time and makes them available to the general public.

A firm is deemed private before an IPO if few shareholders are confined to accredited investors and early investors. After an IPO, the issuing firm becomes a publicly traded corporation on a recognized stock exchange. As a result, an IPO is often known as “becoming public.”

IPO Readiness Approach

Tax leadership should be actively involved when a firm considers an IPO or similar deal to publicize the company. Companies should prepare a clear strategy and timeline well before submitting the Form S-1 registration statement with the SEC and carefully analyze the tax department’s readiness to function as a public business.

Project monitoring, financial reporting and registration statements, corporate governance, systems, process and controls, and technical tax problems should all be included in a complete tax IPO road map.

Know-How Much Equity You Have In Your Business And How Much You Expect To Get In The Future

You’ll want to know everything there is to know about your company’s stock plan and the shares and options you presently possess early on. Among the crucial questions to ask are:

  • Do I have stock options, stock shares, or a combination of both?
  • What type(s) of stock and options do I currently possess or anticipate receiving in the future?
  • When did I buy my shares, and when did I sell them?
  • Does my business enable me to exercise my options early if I own them?
  • What is the date of my vesting?

Choosing how much to invest in your firm is a crucial aspect of this process. You’ll need to consider the hazards of having a concentrated stake in your firm and figure out how you’ll pay for your stock acquisitions. It may entail taking out loans that you’ll return once you’ve sold a portion of your investment. You may start planning how to handle such assets after you know precisely what kind of shares and options you presently possess and anticipate getting.

Exercising Stock Options As Quickly As Possible Is A Good Idea

If you have stock options, you won’t be able to own shares in your firm until you exercise them. Determine whether your firm permits workers to “early exercise” their options before they vest (and before the IPO date). If that’s the case, weigh the benefits and drawbacks of exercising your stock options early. It might save you a lot of money in the long run, but keep in mind that you’ll have to pay for the shares and any taxes associated with the transaction long before you can enjoy any profit.

Scroll to Top