What is an 83(b) Election?
An 83(b) Election allows you to tell the IRS that you choose ("elect") to have the value of your stock grant taxed based on its value at the time of granting rather than when it vests in the future.
If a startup founder paid very little for their shares, this tax burden could be much lower than if the stock later rises in value and is then treated as taxable income at that time! You make an 83(b) Election by sending a signed letter to the IRS. Symbola will help you generate that letter now.
Who should file an 83(b) Election?
In most situations, startup lawyers will strongly advise founders in a brand new startup who have stock subject to vesting to file the 83(b) Election. An 83(b) Election should be considered by anyone subject to U.S. taxation who is issued stock subject to a vesting schedule. This includes startup founders who used Symbola's founder shares tool to issue common stock, which is subject to a vesting schedule! The election must be filed within 30 days of the issuing of the shares.
While an 83(b) Election can have significant tax advantages for individuals who acquire stock that increases in value, the reverse is also true! If you are at a startup where the stock you are granted has a high value at the time of the grant, and you elect to pay your taxes on a grant upfront by making an election, there's no refund on those taxes if that company later goes bankrupt!
Where do I get my 83(b) Election form
Founders who incorporate using Symbola's free startup plan get this tool for free.