The 83(b) election: the 30-day decision every founder must get right

When you receive stock that vests over time, the default rule taxes you as each tranche vests, at its value at that time. An 83(b) election lets you be taxed at grant instead, when the stock is usually worth almost nothing.

What the election does

Without an election, if your founder shares vest over four years and the company's value rises, you recognize ordinary income each time shares vest, without any cash to pay the tax.

With an election filed within 30 days of the transfer, which is usually the date the stock is issued to you, the treatment changes:

• You recognize income equal to value minus what you paid, often zero for founders who pay fair value.
• Future appreciation is capital gain when you sell.
• Your holding period for long-term gains and QSBS begins at transfer.

How to file

1. Prepare the election statement with your name, address, taxpayer ID, description of the property, transfer date, restrictions, fair market value, and amount paid.
2. File it with the IRS within 30 days. The IRS publishes Form 15620 as a standard format for the election. You can submit it online through your IRS Online Account or by mail, and certified mail with a return receipt remains common.
3. Give a copy to the company.
4. Keep proof of the filing date permanently, such as the online confirmation or your mailing receipt.

The 30-day clock starts when the stock is transferred to you, which is usually when it's issued under your signed agreement and can be later than the board's approval. If you're unsure, count from the earliest possible date. A deadline that falls on a weekend or legal holiday moves to the next business day, but there is no other extension.

Key numbers: 30 days from transfer · income at transfer equals value minus price paid · holding period starts at transfer.

When it makes sense

• Founders buying shares at par value at formation almost always benefit.
• Early employees granted restricted stock or early-exercising options when the spread is small are also good candidates.
• Later employees receiving restricted stock at high values should weigh the upfront tax against the risk of forfeiture. If you leave before vesting, you can't deduct the tax paid.

Early exercise of options

Some companies let employees exercise unvested options and file an 83(b) on the resulting restricted stock. For ISOs, this can also minimize AMT if the spread is near zero at exercise. See our ISO and AMT guide for details.

A worked example

Two founders each buy 4M shares at $0.0001 per share, for $400 each, with four-year vesting, and both file 83(b) elections. Three years later, the shares are worth $2 per share. Without the election, each would owe ordinary income tax on every vest at the value then. At today's $2 a share, the 3M shares vested so far are worth about $6M. With the election, they paid tax on zero and will have long-term capital gain, likely QSBS-eligible, at exit.

Common mistakes

1. Missing the 30-day deadline.
2. Not paying fair market value, creating taxable income at grant.
3. Losing proof of filing, which becomes an issue in due diligence.
4. Assuming RSUs can use an 83(b), which they generally can't.

How Summer Associates helps

Summer Associates prepares and files 83(b) elections, reviews founder stock pricing, and keeps documentation ready for financing and acquisition due diligence.

This guide is general education based on federal and Connecticut law as of 2026-11-15. State rules differ and facts matter. Before acting, get advice for your situation from Summer Associates or another qualified advisor.