If your company reaches a point at which it will go public, you should be prepared to act quickly. This is an opportunity for you to take advantage of a potentially lucrative possibility. Failing to act soon enough may lead you to regret your hesitation down the road, so take these suggestions into consideration.
Buy Stocks Early
As soon as your employer reveals that the company will be going public, they will offer unvested stock options. You should buy stocks at this time, even if you think you’ll be leaving the company in the near future. If you do resign, your employer will buy back those stocks at the price you paid. However, if you stay with the company, the stocks will begin meeting the deadline to qualify as long-term gains, which will benefit you at tax time. Since you must hold the stocks for a minimum of one year, starting this process as soon as possible is essential.
Sell Your Stock Soon
Another thing to consider is when to sell your stock. While you may have faith in your company, selling some shares once they are vested is often a wise financial move. Of course, you will have to know how insider trading laws apply to this type of situation, since selling your shares may make it seem as though you had information about the business’ financial future. If you were required to sign off on a 10b5-1 plan, it will benefit you to read through the document and understand how the terms apply to you.
Handling Your New Wealth
Once you sell your stocks, you’ll likely have a considerable amount of cash at your disposal. You may want to spend some of it, invest it, or simply store it in a savings account. Whatever you decide to do, consider hiring a reliable and reputable financial advisor to assist you. A professional can help you determine which options are best for you, so you can maximize your earnings. An advisor can also help ensure you’re fully aware of any tax consequences for the actions you take.
When it comes to the potential of owning stock in your employer’s company, it’s best to act quickly. If you change your mind down the road, you can always sell your shares. In considering the potential for growth and the possible tax benefits, acting quickly is almost always in your best interests.