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.