Shares issued now but subject to vesting or repurchase if someone leaves. Founders typically receive restricted stock at formation. Unlike options, you own the shares immediately but may forfeit them if you leave early.
Why it matters
Restricted stock is how most founders receive their equity at incorporation. Unlike options, you own the shares immediately, but understanding the vesting restrictions and tax implications (especially the 83(b) election) is critical. The 30-day window for filing an 83(b) election is one of the most important deadlines in a founder's early journey.
How it works
When you receive restricted stock, you get actual shares that are subject to a repurchase right. If you leave before fully vesting, the company can buy back your unvested shares at the original price (usually near zero). Filing an 83(b) election within 30 days lets you pay taxes on the shares' current low value rather than their potentially much higher value as they vest. For example, if you receive 1 million shares at $0.001/share at incorporation, filing an 83(b) means you pay taxes on $1,000 now rather than on the much higher value those shares will have when they vest over the next four years.
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