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FYI to stock option noobs: 83(b) Election: is a provision under the Internal Revenue Code (IRC) that gives an employee, or startup founder, the option to pay ta
by ransom1538 5y ago
FYI to stock option noobs: 83(b) Election: is a provision under the Internal Revenue Code (IRC) that gives an employee, or startup founder, the option to pay taxes on the total fair market value of restricted stock at the time of granting.
During this election you pay for your shares at the beginning (usually the cheapest strike price you will ever get). This lets you take advantage of capital gains rates. Do this! I also advise exercising if you have a 90 day window if the company has any type of profit or product, remember! you do not have to exercise 100%!
- deleted 5y ago[deleted]
- catillac 5y agoNote the granting party has to allow this, one cannot unilaterally take their granted options and make an 83(b) election. It’s often a smart thing to do, but it’s not quite “One Weird Trick” to pay less in taxes.
- sjburt 5y agoIt is worth asking during negotiations, especially if company is pre-money and the strike price is under a cent. There is no measurable cost to it for the employer. Oftentimes founders are unaware that this is something they can even offer.
- shawabawa3 5y agocan you do an 83(b) election on options though? You usually aren't given RSUs at a deep discount as mostly only public companies issue RSUs
- brianwawok 5y agoThis is always what I have heard as a founder trick, to 83b on a c-corp and basically turn their initial stock into pure capital gains. For us small timers doing a LLC, we don't need to mess with 83b. Created the company from nothing, it is automatically going to be a capital gains. * Based on my convos with my accountants, not tax advice, blah blah.
- deleted 5y ago[deleted]