The Advisors' Blog

This Forbes article from Bruce Brumberg – longtime friend of the site and Editor-in-Chief / Co-Founder of myStockOptions.com – provides a number of helpful reminders about employee equity compensation in the wake of an IPO.

While the article is primarily aimed at individual financial planning, it’s also a helpful read for anyone involved with equity plan administration or employee compensation strategy. Here’s something that companies on the path to public may want to remind people of:

Post-IPO Lockup On Stock Sales Does Not Delay Taxes On Equity Comp

A “lockup” after an IPO prohibits employees from selling their shares for an extended time. Even though you cannot sell shares to pay taxes, the lockup does not delay the taxes you owe on income recognized when you exercise stock options or when your RSUs vest, including the alternative minimum tax (AMT) on incentive stock options (ISOs). While this seems illogical, as the stock price could drop by the time you can sell, you will need to find a way to pay those taxes other than selling the locked-up shares.

Members can find benchmarking and other helpful resources about IPO-related compensation issues in our “IPOs” Practice Area. If you’re not already a member, sign up today!

– Liz Dunshee