This is for founders, early employees and anyone holding equity in a company that has not sold yet — and for the person whose shares became public last quarter. The defining problem is sequencing: the decisions with the largest tax consequences are made when the stock is worth almost nothing and nothing can be sold, and the decisions about concentration cannot be made at all until a liquidity event, at which point they become urgent.
What is actually different about your money
The instrument decides almost everything, and most people learn theirs from a portal. An incentive stock option under IRC § 422 generally produces no regular-tax income when you exercise it — but the spread between strike and fair market value is an adjustment for alternative minimum tax in the year of exercise, which is how people end up owing cash on stock they cannot sell. Your employer sends Form 3921 after the exercise; keep it, because it carries the dates and values everything downstream is computed from. A non-qualified option is simpler and blunter: at exercise, fair market value minus what you paid is ordinary compensation income, it appears on the W-2, and it is withheld on. Restricted stock units are not options at all — there is nothing to exercise and nothing to elect; they become ordinary income when they vest. And restricted stock, meaning actual shares issued subject to forfeiture, is the one instrument where the 83(b) election exists. Filing it means electing to be taxed on the value at transfer rather than at vesting, the window is 30 days after the transfer, the IRS now publishes Form 15620 for it, and it may not be revoked except with the IRS's consent. Thirty days is thirty days. There is no late-filing procedure worth relying on.
Then alternative minimum tax, which for a founder is not an abstraction but a cash-flow event. For 2026 the AMT exemption is $90,100 for a single filer and $140,200 filing jointly, and it phases out at fifty cents on the dollar above $500,000 and $1,000,000 of alternative minimum taxable income — gone entirely at $680,200 and $1,280,400. An ISO exercise can push you through that range using income that does not exist for regular tax purposes and cannot be converted into money, because the shares are illiquid and the company's transfer restrictions say so. California then computes its own alternative minimum tax on Schedule P (540) under its own rules. This is exactly the kind of decision that belongs with a CPA who models it before you sign the exercise notice, not after.
And then the fact that costs Californian founders the most money and appears in the fewest conversations. Federal law under IRC § 1202 lets a taxpayer exclude gain on qualified small business stock: for stock acquired after 4 July 2025 the exclusion is 50% at three years, 75% at four and 100% at five, with a per-issuer cap of $15 million or ten times basis; stock acquired on or before that date keeps the older rules — five years, and $10 million or ten times basis. The company must be a domestic C corporation with aggregate gross assets at or under $75 million ($50 million for the older stock), and the shares must be original issuance. An LLC or an S corporation cannot issue QSBS at all. California does not follow any of it. The Franchise Tax Board's instructions for California Schedule D (540) state that "California does not conform to the qualified small business stock deferral and gain exclusion under IRC Sections 1045 and 1202" and direct the taxpayer to enter the entire gain realised. A California resident can therefore exclude millions from federal tax and owe California on every dollar of the same gain, at rates reaching 13.3%. That is one sentence in a form instruction and it is worth more than most of what gets discussed at a cap-table meeting.
What you are usually sold
Two things get sold to people holding a lot of one company. Before liquidity, it is typically insurance and lending: a large permanent policy framed as the founder's own pension, or a credit line secured against the position so you can buy a house without selling shares. After liquidity — sometimes the same week — it is the structured menu: exchange funds with multi-year lockups, variable prepaid forwards, collars, and separately managed accounts with layered fees. None of these are frauds. Several of them solve real problems for people with genuinely enormous single positions. All of them have costs that live in spreads, lockups and counterparty terms rather than on an invoice, which makes them very hard to compare against the plain alternative of selling some stock and paying the tax.
The more common experience, though, is being sold nothing at all. Most equity holders get a login to an administration platform, a help article about 409A valuations, and a colleague's opinion — and from that they make the largest tax decision of their lives on a 30-day clock. That is not anyone's malice. It is just a gap, and it is the gap this page exists to name. Who is actually a fiduciary to you.
None of that is illegal and not all of it is wrong. But you are entitled to know how the person recommending it is paid, and to compare. Our standard · our fees, published · the difference between an RIA and a brokerage.
What we do instead
We do not advise on exercise timing and we do not give tax advice. What we do first is build the map, because almost nobody has one: every grant, its type, grant date, strike, vesting schedule and expiration; whether the plan permits early exercise; whether any 83(b) window is open right now, today; what the post-termination exercise window says — often 90 days, but that is a term of your plan and not a law; and what the company's transfer restrictions and rights of first refusal actually permit. That document then goes to two people. Your CPA models AMT exposure, holding periods and whether § 1202 is even in play, including the California answer. Securities counsel handles transfer restrictions, secondary sales and anything involving a trading plan. We coordinate; we do not substitute.
Then concentration, which is the part we own. Before liquidity you cannot fix it — you can only stop making it worse, by not buying more of the same sector with the salary and by building something outside the company that survives the company. After liquidity the problem inverts: the risk that was unavoidable on Friday becomes a deliberate choice on Monday, and the argument for holding is the same argument you used while it was illiquid, which was not a decision at all. The practical answer is to decide the sell-down before the window opens and write it down: how much, over what period, and on what dates, so the decision is not made by your feelings about a price. For public shares that plan is a Rule 10b5-1 arrangement drafted by counsel — the SEC's 2022 amendments require a cooling-off period before trading may begin, a written certification from directors and officers, a good-faith standard that runs for the life of the plan, and generally no more than one single-trade plan in any twelve months. Where a concentrated position remains and it is suitable, disclosed and inside a managed account, covered calls are one of two options strategies we use — with the trade-offs stated plainly rather than as an income promise. How we use them · what a covered call actually gives up.
The rest is unglamorous and it is what survives a zero. A retirement plan for the consulting income if you are between things, or a solo 401(k) if you have gone independent; the taxable account that gets funded on a schedule regardless of what the company is worth; tax-loss harvesting across the diversified side so that realised gains elsewhere have something to sit against; and the estate documents that a startling number of founders with eight-figure paper wealth do not have. Tax-loss harvesting · Trust and estate accounts · California estate basics.
The retirement structures that actually apply to you: ISOs / NSOs / RSUs, 83(b) election, QSBS § 1202, Solo 401(k), Cash balance post-exit. Which of those fits depends on how you are paid and whether anyone else is on your payroll — the plan chooser walks through it, and this guide compares them honestly.
A first conversation, at no cost
Fifteen minutes on the phone. If your question has a short answer you get it on the call, and if we are not the right firm for you we will say so.
Where founders and startup employees are in Los Angeles and Orange County
We work across both counties from a principal office in Norwalk. These are the county guides, each naming the cities where this audience actually concentrates:
Our fees, published
No competing advisor page in this area publishes its fees. Here are ours.
| What | Fee |
|---|---|
| Investment management | 1.5% to 2.0% of assets per year; Advisers may set a rate below the standard schedule, as low as 0%, at their discretion — and whatever rate applies to you is disclosed in writing before you engage. Our Form ADV Part 2A, Item 5, states the fee as up to 2.00% of assets per year, subject to negotiation; the firm may waive all or part of it. Generally billed quarterly in arrears |
| Account minimum | No minimum account balance |
| Commissions and product fees | None — we are fee-only |
| Solicitor compensation | May be received or paid under disclosed arrangements |
| Initial conversation | Free, 15 minutes, no obligation |
Complete fee details in our Form ADV Part 2A, Item 5.
Questions
ISO, NSO, RSU — what actually differs?
Timing and character. An ISO creates no regular-tax income at exercise, but the spread is an AMT adjustment that year; hold the shares long enough after grant and after exercise and the eventual sale can be capital gain, and Form 3921 from your employer carries the dates. An NSO creates ordinary income at exercise equal to fair market value minus the strike, reported on your W-2 and withheld on. An RSU is a promise rather than an option: nothing is exercised and nothing is elected, and ordinary income arises at vesting. Because an RSU is not transferred property, an 83(b) election generally is not available for it — that election belongs to restricted stock and to early exercises of options, where actual shares change hands. Confirm your own instrument against your grant documents and your CPA; the label people use in conversation is wrong about a third of the time.
Should I exercise early? Should I exercise now?
We will not answer that, and you should be wary of anyone who answers it quickly. It is a tax question with a securities-law overlay, and it turns on the current 409A valuation, your AMT position for the year, whether you have the cash to pay tax on an illiquid asset, the probability you would forfeit unvested shares, what the plan permits, and whether the company could ever qualify under § 1202. What we do is assemble those facts into one page and put it in front of your CPA and your attorney so the decision gets made with the numbers visible. The one part that is a genuine deadline rather than a judgement call is the 83(b) window: 30 days from transfer, and it does not reopen.
Does California really tax a QSBS gain that is federally excluded?
Yes. The Franchise Tax Board's instructions for California Schedule D (540) state that California does not conform to the qualified small business stock deferral and gain exclusion under IRC Sections 1045 and 1202, and instruct the taxpayer to enter the entire gain realised. So the federal exclusion and the California inclusion can sit on the same transaction in the same year. It also means the § 1045 rollover — reinvesting QSBS proceeds into new QSBS within 60 days — does not get California relief either. Residency at the time of sale matters enormously here and it is a fact-heavy question; take it to a CPA before a closing date is set, not after. How California taxes capital gains.
I have RSUs vesting at a public company. Is that the same problem?
No, and conflating the two is common. Your shares are liquid, the tax is already determined, and your problem is withholding and drift. Federal supplemental wage withholding is a flat 22% until your supplemental wages pass $1,000,000 in a year and 37% above that, and California withholds a flat 10.23% on bonuses and stock options. For someone whose actual marginal rates are higher than those flats, that combination quietly under-withholds and the shortfall arrives in April. Meanwhile the standard sell-to-cover leaves the remaining shares in the account, every quarter, until a large single-stock position exists that nobody ever decided to build. The fix is a written policy — what percentage of each vest is sold on the vest date, and where the proceeds go — agreed before the next tranche.
When can I actually sell after an IPO?
Later than you think and on someone else's calendar. There is a lock-up period from the underwriters, then the company's own trading windows and blackout periods, then insider status if you are a director, officer or large holder, and possibly volume and manner-of-sale conditions on restricted or control securities. The mechanism most people end up using is a Rule 10b5-1 plan, which under the SEC's 2022 amendments requires a cooling-off period before the first trade, a written certification for directors and officers, one single-trade plan at most in a twelve-month period, and good faith throughout. Counsel drafts it and the company's general counsel approves it; we help you decide what it should say about amounts and pacing before it is drafted.
What does this cost, and is there a minimum?
There is no minimum to open an account. We ask for $50 a month of continuing deposits, because a plan you do not fund is not a plan. Investment management is 1.5% to 2.0% of assets per year, billed quarterly, and it is published on the site — which is more than most firms in this market will tell you before a meeting.
Do I have to have a lot saved already?
No, and that is deliberate. Most firms set a minimum precisely to avoid people at the start of this. We built the opposite: $0 to open, and the same fiduciary standard whether the account is four figures or seven.
¿Atienden en español?
Sí. Atendemos en español, y buena parte de nuestro material existe en español, escrito originalmente, no traducido por máquina.