Also, double-check that you are not doing fraud, and don’t confuse this with backdating options. Adjust the Vesting Language to Repurchase at Fair Market Value An 83(b) should be filed when you receive stock that is subject to a “Substantial Risk of Forfeiture.” For our purposes, if stock has a , then it is subject to a Substantial Risk of Forfeiture.
With a vesting schedule, the forfeiture risk is that the stock owner will quit or get fired, and then the company will buy back the stock.
And under this document, the company has the right to buy back the founder’s stock if she doesn’t stick around.
Specifically, it can buy back the founder’s stock (which is generally “par value” - pretty close to $0.00).
“83(b)” is a tax election that saves startup founders a lot of money. Unfortunately, there’s an arbitrary 30 day deadline, and it’s easy to procrastinate and miss the filing.
If the 83(b) window has closed, there are still a few tricks startup lawyers can use to re-issue the grant and restart the 83(b) clock.
But a restricted stock grant doesn’t need to be so stingy with the repurchase price.
Instead of repurchasing at the original purpose price, it can repurchase at Fair Market Value (“FMV”).
When the repurchase right is at FMV, then there is no “Substantial Risk of Forfeiture.” If there is no SRF, there is no tax-as-stock-vests problem.
Here are three tactics for salvaging a blown deadline. Cancel the Grant and Re-issue a New Stock Grant When a startup is still pretty new, it’s probably OK to just cancel the old stock grant, and reissue a new one.
For example, let’s say a founder was granted stock on January 1, and it’s now February 1, and they just remembered they were supposed to file an 83(b).
Most, but not all, vesting schedules will be subject stock to a SRF.
Founders generally get a standard “Restricted Stock Purchase Agreement” with a standard-ish vesting schedule.