• October 2018
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What are restricted stock options? How do they work?

Similar to stock options, there’s a vesting period for restricted stock units (RSUs) where the employee must satisfy certain conditions before the stock or its value is transferred (typically, there’s a period of time and other conditions – e.g., work performance). Unlike stock options, there’s no purchase involved. Instead, a certain number of units are allocated – or granted – to the employee, but there’s no value/funding until after the employee has satisfied the vesting requirements.

After vesting, RSUs are transferrable if the employee accepts the grant. Therefore, these instruments always have a value, in contrast to options that can decline in value by the time of vesting. The value of your RSUs is the closing market value of the stock price on the vesting date. That’s also the point at which your tax liability is triggered, requiring you to pay withholding and income tax on the amount received.

If you want to seek legal guidance from a startup attorney on how to issue RSUs then check out LawTrades. Our legal marketplace offers flat-fee pricing and free no obligation price quotes.

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