Restricted Stock Awards (RSAs)

A restricted stock award (also called stock purchase award) is the sale of stock in exchange for an actual cash payment (or transfer of property with a fair market value that equals the purchase price and which property is not already the Company’s).

The stock purchase right can be granted subject to vesting, or it can be granted fully vested.

Note: If someone has provided services for which the Company has not paid cash to the individual, paying in stock does not relieve the parties from withholding taxes on the value of stock paid on the services or reporting the value of the stock on the W-2/1099 at the end of the year. For instance, if an employer pays an employee a bonus in stock, the employer still has to report the compensation to the IRS and withhold cash from the employee for the applicable withholdings. Paying for services in stock is not a cash-free transaction. Furthermore, if someone is paid a salary for their services, it would be difficult to then argue that those same services were rendered in payment of the purchase price of stock.