The document discusses 6 key things startups need to know about equity compensation. It notes that restricted stock generally has better tax consequences than options if an 83(b) election is filed within 30 days of the grant. It also advises that for tax reasons, equity grants should be made at fair market value and are subject to IRS rules around incentive stock option limits and 409A compliance. All equity grants must be properly approved and documented by the board of directors.

1. wilmerhale.com/emerging-company
6 Things Startups
Need to Know About
Equity Compensation
1. Restricted stock generally has better tax
consequences for founders and early-stage
employees, but you must timely file an 83(b)
election to get the desired tax treatment.
2. 83(b) elections should be filed with the IRS
within 30 days of the date the equity is granted
by your company’s board of directors.
3. For tax reasons, equity grant options should
be made at the fair market value of the
underlying stock at the time of the grant.
4. IRS rules impose a $100,000 annual limit
on vesting of incentive stock options.
5. Investors and potential acquirers will want
to know that you have properly addressed
any 409A issues in connection with
each grant of equity that you make.
6. All equity grants (whether restricted stock
or options) must be approved by the board
of directors and properly documented.
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