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I think this illustrates perfectly why they should talk to a lawyer. I read through the link you posted. They don't mention anything about sec. 83(b) elections.

I think this illustrates perfectly why they should talk to a lawyer. I read through the link you posted. They don't mention anything about sec. 83(b) elections. It's a common strategy to avoid paying taxes until the RSU's are liquidated. I know about it because my current employer structured the RSU's this way. Every ESOP and RSU plan I've ever participated in has been slightly different. Your link focuses on a very specific set of circumstances.

PopAlongKid 2y ago
>They don't mention anything about sec. 83(b) elections Perhaps because it is inapplicable. 83(b) election can only be used for property that has been transferred but not vested. (Having a lock-up period does not mean the property is unvested).
- ryaniscool 2y ago
  This is inaccurate. I'm not going to litigate it with you though. Google it. It's a common strategy for a company to perform an 83(b) election on your behalf when they grant you RSU's. This way, you don't have to pay taxes as the RSU's vest. Also, typically, your shares do not just vest all at once. There is a cliff (typically a year) followed by monthly vesting. That's why the OP's situation doesn't make a lot of sense. They are former employees, therefore a liquidity event would not have triggered any type of vesting.
  - ypzhang2 2y ago
    They most likely have dual trigger RSUs, so the second trigger is typically a liquidity event. You are talking about single trigger RSUs with only time based vesting. Also a 83b means you pay taxes at the time of issuance rather than vesting. If these folks received their shares post founding, that means that there might be substantial tax burden for them when they received these shares if a 83b was filed. This is why most folks do not opt for a 83b after a substantial FMV has been established for their shares. This is also why double trigger RSUs are popular, so you can actually execute sell-to-cover.
    - ryaniscool 2y ago
      I can only speak from my experience but I've worked for two companies where the RSU's are structured as a pseudo-option. Essentially, their price is set at FMV at the time of issuance. Since your net is zero at the time of issuance, you pay no taxes until there is a liquidity event and you can pay to cover. Since this happened to me at two unrelated companies, I imagine it's a very common structure because it follows common sense and it works out great for everyone.
      - FreakLegion 2y ago
        It's not clear what you're describing, so hard to say whether it's common. RSUs are stock. When you get them, you pay tax on their value at income rates. To deal with this you can delay actually getting the RSUs (e.g. double-trigger vesting, common), or the company itself can provide liquidity for taxes (e.g. Carta's net settlement program, not common). Either way, 83(b) elections don't apply. They do apply to RSAs and options with early exercise, so maybe you had one of those. My experience here is as a founder who's spent entirely too many hours with lawyers trying to engineer the most employee-friendly stock plan possible.
        ryaniscool 2y ago
        It's very much a grey area where you can't apply set of hard rules because each corp will do it a little differently. This is why OP needs to talk with a lawyer. I have four data points to your one over my career and I'm only counting the ones that ultimately paid out. - Microsoft - straight straight stock award and options - Atlassian - Pre-IPO straight stock options - Company you never heard of 1 - RSU pseudo-options - Company you never heard of 2 - RSU pseudo-options structured a little differently from company 1
        FreakLegion 2y ago
        Repeat founder, double-digit data points. Yes, companies can do arbitrarily weird things, like OpenAI's PPUs. No, these aren't common at startups, and there's no one way that beats all the others come tax time. If you share the stock plan, or at least concrete details, we can get to the bottom of what you're describing. But understandably you aren't likely to do that.
  - PopAlongKid 2y ago
    >I'm not going to litigate it with you though. Google it. It's a common strategy for a company to perform an 83(b) election on your behalf when they grant you RSU's. This way, you don't have to pay taxes as the RSU's vest. No need to litigate or use internet search, I can just read Section 83(b) of subtitle A of the Internal Revenue Code[0]. Also, the election must be made on your own tax return, no one else can make it "on your behalf". You have not explained what part of my comment in inaccurate. Many companies are as ignorant of the actual law as their employees. [0]https://www.law.cornell.edu/uscode/text/26/83 https://www.law.cornell.edu/uscode/text/26/83

PopAlongKid 2y ago

>They don't mention anything about sec. 83(b) elections Perhaps because it is inapplicable. 83(b) election can only be used for property that has been transferred but not vested. (Having a lock-up period does not mean the property is unvested).

ryaniscool 2y ago
This is inaccurate. I'm not going to litigate it with you though. Google it. It's a common strategy for a company to perform an 83(b) election on your behalf when they grant you RSU's. This way, you don't have to pay taxes as the RSU's vest. Also, typically, your shares do not just vest all at once. There is a cliff (typically a year) followed by monthly vesting. That's why the OP's situation doesn't make a lot of sense. They are former employees, therefore a liquidity event would not have triggered any type of vesting.
- ypzhang2 2y ago
  They most likely have dual trigger RSUs, so the second trigger is typically a liquidity event. You are talking about single trigger RSUs with only time based vesting. Also a 83b means you pay taxes at the time of issuance rather than vesting. If these folks received their shares post founding, that means that there might be substantial tax burden for them when they received these shares if a 83b was filed. This is why most folks do not opt for a 83b after a substantial FMV has been established for their shares. This is also why double trigger RSUs are popular, so you can actually execute sell-to-cover.
  - ryaniscool 2y ago
    I can only speak from my experience but I've worked for two companies where the RSU's are structured as a pseudo-option. Essentially, their price is set at FMV at the time of issuance. Since your net is zero at the time of issuance, you pay no taxes until there is a liquidity event and you can pay to cover. Since this happened to me at two unrelated companies, I imagine it's a very common structure because it follows common sense and it works out great for everyone.
    - FreakLegion 2y ago
      It's not clear what you're describing, so hard to say whether it's common. RSUs are stock. When you get them, you pay tax on their value at income rates. To deal with this you can delay actually getting the RSUs (e.g. double-trigger vesting, common), or the company itself can provide liquidity for taxes (e.g. Carta's net settlement program, not common). Either way, 83(b) elections don't apply. They do apply to RSAs and options with early exercise, so maybe you had one of those. My experience here is as a founder who's spent entirely too many hours with lawyers trying to engineer the most employee-friendly stock plan possible.
      - ryaniscool 2y ago
        It's very much a grey area where you can't apply set of hard rules because each corp will do it a little differently. This is why OP needs to talk with a lawyer. I have four data points to your one over my career and I'm only counting the ones that ultimately paid out. - Microsoft - straight straight stock award and options - Atlassian - Pre-IPO straight stock options - Company you never heard of 1 - RSU pseudo-options - Company you never heard of 2 - RSU pseudo-options structured a little differently from company 1
        FreakLegion 2y ago
        Repeat founder, double-digit data points. Yes, companies can do arbitrarily weird things, like OpenAI's PPUs. No, these aren't common at startups, and there's no one way that beats all the others come tax time. If you share the stock plan, or at least concrete details, we can get to the bottom of what you're describing. But understandably you aren't likely to do that.
- PopAlongKid 2y ago
  >I'm not going to litigate it with you though. Google it. It's a common strategy for a company to perform an 83(b) election on your behalf when they grant you RSU's. This way, you don't have to pay taxes as the RSU's vest. No need to litigate or use internet search, I can just read Section 83(b) of subtitle A of the Internal Revenue Code[0]. Also, the election must be made on your own tax return, no one else can make it "on your behalf". You have not explained what part of my comment in inaccurate. Many companies are as ignorant of the actual law as their employees. [0]https://www.law.cornell.edu/uscode/text/26/83 https://www.law.cornell.edu/uscode/text/26/83