Section 83(b) elections can be filed with respect to any stock or other property which bears a risk of forfeiture (e.g. vesting). The Section 83(b) election notice tells the IRS that the stockholder wishes to be taxed on the value of the stock or property at the time of issuance, rather than over time as the forfeiture restrictions (vesting) lapse.
This is important because presumably the value of stock increases over time, and if a stockholder fails to file an 83(b) election, they will have to pay taxes based on the value of the stock at the time of each vesting event. That is both a hassle and potentially a huge financial burden, so we strongly recommend that stockholders file 83(b) elections as soon as they receive stock subject to vesting.
In connection with the issuance of founders’ shares, each founder will need to sign the 83(b) Election Notice corresponding to each founder and attached to each Founder Restricted Stock Purchase Agreement (RSPA). Please note that the IRS temporarily allows the 83(b) Election Notice to be electronically signed until 10/31/2023 and it must be received by the IRS no later than 30 days after the issuance date. There are no extensions, so it is extremely important to file the 83(b) election as soon as possible following issuance of the Founders’ Stock.