Restricted Stock
AdvancedRestricted stock is shares given to an employee or founder that are subject to conditions, usually continued employment over a vesting period, and may be forfeited or bought back by the company if the conditions are not met.
Unlike stock options, which give the right to buy shares later, restricted stock gives actual shares from the start, but with restrictions. If the holder leaves before the shares vest, the company can usually take back or repurchase the unvested shares.
Restricted stock is common for founders and early employees of start-ups. For example, a founder might hold 4,000,000 shares that vest monthly over four years with a one-year cliff. If the founder leaves after two years, the company can repurchase the unvested half.
Restricted stock differs from restricted stock units, which are a promise to deliver shares in future rather than actual shares.
Tax treatment varies by country. In the United States, recipients can sometimes file a section 83(b) election within 30 days of receiving restricted stock, choosing to pay tax on the shares' value at grant, which may be very low, rather than as they vest. This can reduce tax significantly if the shares grow in value, but the tax is not refunded if the shares are later forfeited.
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