Fundraising
Restricted Stock vs RSU
Quick definition
Restricted stock is actual shares issued upfront subject to vesting; RSUs are promises to deliver shares at vesting (and only at vesting).
Restricted stock: actual common stock issued at grant, owned by recipient immediately but subject to forfeiture if vesting conditions aren't met. Eligible for §83(b) election. Common at founding. RSUs (Restricted Stock Units): contractual promise that shares will be delivered at vesting. No §83(b) eligibility. Tax due at vesting on then-current FMV (ordinary income). Common at large public companies and increasingly used at late-stage privates.
Frequently asked questions
- What is Restricted Stock vs RSU?
- Restricted stock: actual common stock issued at grant, owned by recipient immediately but subject to forfeiture if vesting conditions aren't met. Eligible for §83(b) election. Common at founding. RSUs (Restricted Stock Units): contractual promise that shares will be delivered at vesting. No §83(b) eligibility. Tax due at vesting on then-current FMV (ordinary income). Common at large public companies and increasingly used at late-stage privates.
- Why is Restricted Stock vs RSU important for startups?
- Restricted Stock vs RSU is a fundraising concept that matters for startup founders because it shows up in fundraising readiness, financial decision-making, and operational discipline at the stage where mistakes are expensive to undo. Founders who understand it are better prepared for diligence, board meetings, and investor conversations.
- What category does Restricted Stock vs RSU belong to?
- Restricted Stock vs RSU is a Fundraising term in the StartupCFO finance glossary, alongside other fundraising concepts that founders, CFOs, and accountants use in startup operations and reporting.
- Where can I learn more about Restricted Stock vs RSU?
- Beyond this definition, see the related fundraising terms below, or explore StartupCFO's insights and tools that put Restricted Stock vs RSU in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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