Welcome, Justyn. Your focus and expertise is in liquidity events, such as tech IPOs. Can you tell us more about your expertise and how that came about?

Our expertise came from going through real life events with multiple clients.  As we have guided clients through the process, we have explored various facets of the planning around taxes, estate planning and wealth management.  Each step of the process brings decisions and potential opportunities that could increase profitability and the amount of wealth that is ultimately created. Examples of steps we consider include: maximizing the QSBS tax advantage, thinking through income taxes in general before the liquidity occurs (which includes considerations like gifting to an out-of-state, non-grantor trust), estate planning and gifting, and how to best diversify out of a single stock (for a client participating in an IPO).

Many advisors have a standard checklist of actions and planning that they review with a client during an IPO or similar equity event. However, the best way to add value to clients differs by client and by transaction. 

When do you recommend that clients who start or join a startup that may IPO first engage with an advisor?

For individuals starting a business, I recommend they first engage an advisor even before that when they think about how to structure their company. Entity structure is undervalued in terms of importance. For employees, I recommend engaging upon receipt of equity as there are planning opportunities and steps to take upon that initial receipt. Some opportunities require proper strategizing and timing to take advantage of them, so the more lead time, the better chance of successfully navigating through it all.

What is the most important piece of advice you give tech clients going through an IPO or similar liquidity event?

It is important to go through every aspect of the liquidity event and ensure there are experts overseeing every step of the way.  Since the numbers are typically large, leakage of as little as 1% can have a large dollar impact.  Further, proper planning can lead to significantly greater wealth to be created for the family over time.  Many planning opportunities are not known by the deal attorneys or investment bankers that are driving the transaction, so a team of experts is required to ensure all facets of the transaction are properly analyzed and assessed.

The biggest mistake people make is not realizing that the deal attorneys and investment bankers are typically not experts in personal tax planning or wealth management.

What mistake do most people make around startup IPOs (either from a financial or tax planning perspective)?

The biggest mistake people make is not realizing that the deal attorneys and investment bankers are typically not experts in personal tax planning or wealth management.  It is important to also involve CPAs, trust & estate attorneys, wealth managers, financial advisors and a collaborator who can understand the complexities of the transaction to ensure everyone is working together efficiently and optimally.  The IPO of a company or other large liquidity event can be a significant crossroads in a family’s life, potentially for generations to come; proper planning and wealth management can make a significant difference in the wealth created.

Where do you think an advisor can add the most value to clients surrounding an IPO?

Discovery.  Many advisors have a standard checklist of actions and planning that they review with a client during an IPO or similar liquidity event, however the best way to add value to clients differs by client and by transaction.  The most valuable thing an advisor can do is a complete and thorough discovery to understand the transaction, as well as the clients balance sheet and wishes.  Questions the advisor should be asking the client are things like: ‘

Answers to these questions will allow an advisor to customize the planning to address what’s most important to the client.

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