83(b) Election
Définition
An 83(b) election is a filing with the IRS, made within 30 days of receiving restricted stock, that lets the recipient pay tax on the shares' value now instead of as they vest, locking in a low valuation before it rises.
Comment cela se présente dans le financement
Founders almost always file an 83(b) election on their founder stock immediately after incorporation, when the company's value is close to zero, so future appreciation is taxed at capital gains rates instead of ordinary income.
Questions fréquemment posées
What happens if a founder misses the 30-day window to file an 83(b) election?
The election cannot be filed late for any reason, and the recipient is then taxed as ordinary income on the value of each tranche of stock as it vests, which can mean a real tax bill on paper gains.
Does an 83(b) election apply to stock options?
No, it applies to actual restricted stock, such as founder shares or early-exercised options, not to unexercised options, which are taxed under different rules.
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