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.
ACCELERATE YOUR STARTUP LAW KNOWLEDGE!
Startup Law doesn’t have to be a confusing maze. The practical knowledge in "Acceleration: What All Entrepreneurs Must Know About Startup Law" will help you make the smart decisions to protect your startup and its future. Available in ebook and hardcover.
Buy the Book on Amazon