Should I exercise my stock options before the company goes public?
Exercising before an IPO can lower your eventual tax bill because the spread between strike and fair market value is usually smaller while the company is private, meaning less ordinary income on NSOs or less AMT exposure on ISOs. Exercising early also starts your long-term capital gains holding clock sooner. But the risks are real: you're paying cash for illiquid shares that you can't sell, the company might fail, and you could owe AMT on paper value. Only exercise money you can afford to lose, and weigh the strike-price cost plus tax against your conviction. Some employees exercise a portion to balance opportunity and risk. If the spread is already large, the tax hit at exercise may be too steep to justify going early – run the AMT and cash-flow numbers first.
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