83b Election
An 83(b) election is a tax election made by founders issued stock subject to a vesting schedule. The 83(b) election neutralizes a potential disastrous tax consequence, and the founder recognizes “income” upon the initial restricted stock purchase.
If a founder fails to make a 83(b) election, each vesting milestone will be a taxable event for the founder. “Income” will be calculated as the difference between the FMV of the portion of stock that vested and the original purchase price of the newly-vested portion.
About the Author
Ryan Roberts is a startup lawyer and represents technology companies through all phases of the startup process, including incorporation, seed & venture financings, and exit transactions. Click here to learn more about his practice.
