A founder's restricted stock, start to exit

Follow one founder's restricted stock from incorporation to acquisition, and watch how a single form filed in week one decides what the exit actually pays. The tax fork happens at the beginning, not the end.

Restricted stock · Case studies

What decides how much a founder keeps from a great exit? Not the exit. The week the company is born. I want to walk one founder’s restricted stock from incorporation all the way to an acquisition, because the single move that mattered most happened before the company had a logo. This is a composite, the kind of story I see often enough that the details are real even when the person is not.

Week one: the stock and the fork

Maya co-founds a company. She gets founder shares, real stock she owns at grant, on a standard four-year vesting schedule with a one-year cliff. At incorporation the stock is worth a fraction of a cent. The company has no revenue and no product.

She has 30 days to make one decision: file an 83(b) election or not. She files it. She reports a few dollars of income, pays almost nothing, and mails the letter with proof inside the window.

The whole case turns here

Maya’s exit math was decided in week one, not at the sale. By filing on near-zero stock, she converted all future growth from ordinary income to capital gains and started her holding clock that day. Everything good that happens later traces back to this one form.

Years one through four: vesting quietly

The company grows. By the time Maya’s shares finish vesting, the stock is worth real money on paper. Here is the part founders miss: because she filed the 83(b), none of that vesting created a tax bill. She already paid tax (a few dollars) at grant. The shares vesting into a higher value is a non-event for taxes.

Run the counterfactual. Without the election, each vesting slice would have been ordinary income at that year’s climbing value, taxed at her salary rate, on shares she could not sell to pay the bill. Same company, same growth, a tax bill every year instead of none.

Year five: the acquisition

A larger company acquires the startup. Maya’s shares convert to cash in the deal.

Her basis is tiny, so the gain is large

Because she elected at grant, her cost basis is what she paid plus the few dollars she reported. Almost the entire payout is gain.

The gain is a capital gain, not wages

Thanks to the 83(b), the whole appreciation is a capital gain. Held long enough past her grant, it is long-term, taxed at the lower rate instead of her ordinary rate. For 2026 that long-term rate is 0%, 15%, or 20% depending on income 2026 (the 20% rate starts above $545,500 single or $613,700 married filing jointly), versus an ordinary rate that tops out at 37% 2026, with the 3.8% net investment income tax possible on top 2026.

The holding clock may unlock more

Because her clock started at grant, she may also qualify for the QSBS exclusion if the stock meets the company tests, which can take a large chunk of the federal gain off the table entirely.

The fork, in one comparison

Two versions of the same founder, same company, same exit. The one who filed the 83(b) in week one pays capital gains rates on the growth and may shelter much of it. The one who forgot paid ordinary income rates vest after vest on the way up, on shares she could not sell, and arrived at the exit having already given away the difference. The gap between them is not skill or luck. It is one letter, mailed on time.

Confirm the QSBS numbers with counsel

The QSBS rules changed in 2025, and the exact exclusion percentage, per-issuer cap, gross-assets ceiling, and holding-period tiers depend on when your stock was issued and your specific facts. Treat the figures here as directional, and confirm the current numbers with a tax professional before you rely on them.

What this means for you

If you are starting a company or joining one early, the most valuable thing you do for your eventual exit is probably the least glamorous: file the 83(b) on near-zero stock inside 30 days, keep the proof, and forget about it. The exit takes care of itself if the beginning was handled right. Walk through how to file the same week you get the shares, and if your stake could ever be large, get a fast read before the window closes.

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