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Restricted Stock

Restricted Stock

Restricted stock is an outright grant of common stock subject to vesting and company repurchase rights for unvested shares. Used primarily for founders and very early employees in C-corp startups, the recipient owns the shares from grant date, can file an 83(b) election to lock in tax treatment at the near-zero grant-date value, and starts the long-term capital-gains holding clock immediately. It is structurally different from stock options (which are rights-to-buy, not ownership) and from RSUs (which are promises to deliver shares in the future).

The mechanic of a restricted stock award:

  • Grant: the company issues actual shares of common stock to the recipient, subject to vesting (typically 4 years with a 1-year cliff for ...

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