Employee equity
Early exercise, reverse vesting, and 83(b)
Understand how early exercise creates restricted shares, what a US Section 83(b) election concerns, and how Cap Table records supporting dates.
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Early exercise changes the instrument held
Early exercise allows an option holder to purchase shares before all of the option has vested, when the agreement permits it. The purchased shares may remain subject to vesting-related repurchase rights. This is different from accelerating the vesting schedule.
For example, a holder may purchase 20,000 shares while only 5,000 have vested. The remaining 15,000 shares can still be subject to the agreement’s restrictions. Payment alone does not remove those restrictions.
Reverse vesting applies to issued stock
Restricted founder stock and shares from an early exercise can carry reverse vesting. The shares have been issued, while the restrictions change over time. In Cap Table they remain outstanding shares, with vesting tracked on the certificate.
On departure, review the actual repurchase right and event. Recording departure does not itself buy back the shares. Use the transfer/repurchase workflow only when recording the corresponding transaction.
Section 83(b) is a separate US election
For qualifying substantially nonvested property transferred for services, a US Section 83(b) election generally includes the transfer-date excess of FMV over the amount paid in current income instead of waiting for substantial vesting. Whether an election is appropriate depends on the property and taxpayer’s facts.
The IRS Form 15620 and instructions describe who may elect, required information and copies, and the filing period of no later than 30 days after transfer, including the stated weekend and legal-holiday rule. Use the applicable IRS instructions for the actual filing. An unexercised option or unsettled RSU is not interchangeable with transferred restricted stock.
Track evidence without confusing it with filing
Record the actual exercise and certificate date, vesting terms, and election filing status in Cap Table. The app’s reminder is based on recorded dates. Saving a filed status or attaching a document does not submit an election to the IRS.
Retain the signed election and evidence of timely filing independently. Do not enter an invented filing date to clear an overdue item. The attention workflow can record that an election was not filed, which preserves a different fact from a successful filing.