Vesting applies to founders' shares, not only employees'

The record

Founders' own stock is typically subject to a vesting schedule set out in a restricted stock purchase agreement at incorporation, the same mechanism used for employee options. Cooley GO's guide to early exercisable stock options states that when a holder exercises before vesting, “the optionholder receives common stock that is subject to the same vesting schedule that applied to the stock option,” commonly running over “a four year period.” Until the shares vest, “the company will generally have the right to repurchase the stock that is unvested” if the holder departs, at the lower of exercise price or fair market value.

What the sources establish

The tax election that makes early exercise or founder stock workable is governed by federal regulation, not company policy. 26 CFR 1.83-2 states the election “shall be filed not later than 30 days after the date the property was transferred,” and Cooley GO's guide confirms the same window: filing “must be filed within thirty (30) days following the date of exercise.” The regulation requires the statement to include the taxpayer's identifying information, a description of the property, the transfer date, the restriction, the fair market value at transfer, and any amount paid, filed with the taxpayer's own IRS office, with a copy given to the company. IRS Publication 525 separately confirms the agency's own recognition of “choosing to include in income for year of transfer” for restricted property. Filing lets the holder “immediately include in gross income any 'spread'” at the low, unvested valuation rather than later, as shares vest and, typically, appreciate.

Scope and revision

The regulation is of general application and does not set vesting schedules; the four-year schedule and repurchase mechanic in the Cooley GO guide are common practice as described, not a legal requirement. The guide notes some companies avoid early-exercise features because of disputes when an employee misses the deadline, an outcome the regulation makes irreversible: no cure period exists once the window closes. Neither source describes acceleration on a sale or a termination without cause; those terms live in a separate agreement, not in the regulation or this guide.

The decision in front of you

Anyone granted unvested stock, founder or employee, should calendar the 83(b) election's 30-day deadline the day the shares transfer, since the regulation gives no extension and missing it is not merely a paperwork problem. This is an editorial point beyond the sources: the election is favorable only when the fair market value at transfer is low relative to expected future value, usually, though not always, true at a company's earliest stage.

• What is the exact transfer date that starts the 30-day clock, and is it calendared with a hard deadline?
• Does the election statement include every item the regulation requires: identification, description, dates, restrictions, value and price paid?
• Separately from vesting itself, does any acceleration provision exist for a sale or an involuntary termination, and where is it written?

A vesting schedule and an 83(b) election are two different documents solving two different problems, ownership timing and tax timing, and treating either as automatic is how the 30-day deadline gets missed.