Your Success Shouldn't Look Like a Liability

Earlier is better, and it’s rarely too late to add value. Spreading sales across two to four tax years to avoid bracket compression and building a tax-loss bank in the rest of your portfolio to offset future gains often times works better the more time you have to plan them. The same is true of timing sales around a major financial milestone, which is generally more effective when addressed two to three years ahead rather than when the need is imminent. A diversification plan typically works best as a standing practice, not something you start only when circumstances force it. If an IPO or tender offer is approaching, that timeline matters even more. Engagements that begin at least 18 to 24 months out tend to have the most options available.

It depends on the type of equity you hold and the strategies deployed beforehand. We find that without meaningful planning, federal and state tax exposure on ISO exercises, RSU vesting, or an outright sale of concentrated stock can approach 40 to 50 percent. With proper structuring, that number can drop substantially. The variance is why coordinated planning matters. L-Tax, our dedicated tax team, models your specific situation across scenarios so you understand what’s at stake before decisions are locked in.

Because we believe the biggest concentrated stock mistakes happen in the gaps between specialists. Your CPA is thinking about tax, your attorney is thinking about structure, and your investment manager is thinking about what to do with the proceeds. Each may be doing an excellent job, but the decisions made in each silo affect each other. Lido One coordinates across all three so that a decision made for tax reasons doesn’t create an estate problem, and a decision made for estate reasons doesn’t create a tax problem.

More than most people expect. Before liquidity arrives, the productive decisions include an exercise strategy (which options to exercise, when, and how much AMT exposure that creates), an initial diversification framework for when shares become sellable, and, for those who hold qualifying pre-IPO stock, evaluating QSBS eligibility before any sale. For insiders or employees with regular access to material nonpublic information, it also means setting up a 10b5-1 trading plan well before the lockup lifts, since it must be established during an open trading window and is subject to a mandatory cooling-off period. Some of these decisions cannot be reversed once the event happens. Others can become significantly more expensive to unwind. The goal is to walk in knowing which decisions are on the table, which are already made, and which need to wait.

There is no single right answer. The right pace depends on your tax exposure, your risk tolerance, the specific concentration you are holding, and any lockup or trading restrictions. In some cases, diversifying quickly minimizes single-stock risk but crystallizes a tax bill. In others, a phased approach using hedging strategies, exchange funds, or charitable structures reduces both tax and concentration risk simultaneously. Lido builds a diversification plan around your specific tax picture, timeline, and risk framework so the sequence is deliberate rather than reactive.

Delays are increasingly common, particularly for pre-IPO employees at companies whose public offerings have been pushed out. The planning still applies. Tax strategies are re-modeled against updated timelines, vesting cliffs are reviewed, and secondary market decisions are evaluated. In many cases, additional time works in your favor because it opens up strategies that require longer holding periods. Lido works with clients through timeline uncertainty, not just around confirmed events.

Yes, meaningfully. RSUs are taxed as ordinary income when they vest, whether or not you sell, and new grants continually replace vested ones, which is part of why concentration tends to persist. ISOs can qualify for preferential tax treatment if you meet the holding period requirements but exercising them can trigger AMT before you even sell any shares. NSOs are simpler: the spread between your exercise price and the stock’s value at exercise is taxed as ordinary income. Each type carries its own tax treatment and planning considerations, and an accurate diversification plan starts with a complete picture of what you actually hold, including unvested awards and unexercised options.

QSBS refers to Qualified Small Business Stock under Section 1202 of the Internal Revenue Code, and it can exclude a significant portion of capital gain from federal tax on the sale of eligible stock in a qualifying C-corporation. The rules changed materially in 2025: for QSBS issued after the One Big Beautiful Bill Act’s enactment on July 4, 2025, the exclusion is tiered, 50% after a three-year holding period, 75% after four years, and 100% after five years, with a per-issuer exclusion cap raised to $15 million. Stock issued before that date remains subject to the prior rules, including the original $10 million (or 10x basis, whichever is greater) exclusion cap after a five-year holding period. Qualification depends on the issuance date, the company’s assets at issuance, and the type of business, and it’s one of the most commonly missed provisions for founders and early employees. Lido can evaluate your specific situation, including which rule set applies to your shares, and help structure a sale to preserve or expand your QSBS eligibility.

Not always. Pre-IPO, blackout periods can limit trading. After an IPO, a lockup period, typically around 180 days, generally prevents any sales at all. Once the lockup lifts, insiders and employees with access to material nonpublic information may still face trading windows or need a Rule 10b5-1 plan. This pre-scheduled selling program can permit sales even during blackout periods when it’s set up correctly and in advance. Understanding which restrictions apply to you, and building a plan around them, is part of preparing for liquidity well before it arrives.

Lido provides integrated planning across the disciplines of investment management, tax, and trust and estate planning. These services are coordinated through Lido One, so decisions about exercise strategy, tax exposure, and diversification are made with your full financial picture in view.

Yes. Lido has in-house tax professionals who work alongside investment and planning advisors year-round, modeling the tax exposure specific to your situation, whether that’s exercising options, managing AMT, or capital gains on a sale.

No. These services are available through Lido One, our fully integrated platform, or on an à la carte basis, depending on your needs.