Section 83(b)
An 83(b) election changes when restricted property is taxed.
It is not a company-formation form and not every founder needs one. It matters when property is transferred for services while still subject to a substantial risk of forfeiture.
first confirm that property was actually transferredThe problem it is trying to solve.
Founder stock often vests over time. The founder receives shares, but the company may repurchase or forfeit the unvested portion if the founder stops providing services. Tax law calls this kind of property substantially nonvested when the relevant conditions are met.
Without an election, the tax point generally follows vesting. An election under section 83(b) instead asks to include the relevant value at transfer, using the rules that apply at that time. Whether that produces a better result depends on the value, purchase price, restrictions, future outcome, and the founder's tax circumstances.
The IRS describes the mechanics in Form 15620 and its instructions. The form is available for convenience; the decision itself deserves advice from someone who can review the equity documents and tax consequences together.
Questions to settle before filing.
- 01
Was property transferred for services?
A promise of future equity, an option that has not been exercised, and issued restricted stock are not the same thing. Start with the signed stock purchase, grant, board approval, cap-table entry, and evidence of payment. The election cannot repair an issuance that never happened.
- 02
Is the property substantially nonvested?
Read the vesting and repurchase terms. The IRS instructions focus on property subject to restrictions and a substantial risk of forfeiture. A fully vested issuance presents a different question, while options and other awards can have their own tax rules.
- 03
What was the value and what did the founder pay?
The election asks for the property, transfer date, restrictions, fair market value, and amount paid. Those are factual inputs, not decorative blanks. Keep the valuation support and payment evidence with the election and equity record.
- 04
What happens if the founder leaves or the company fails?
An election may accelerate income inclusion, and the IRS says revocation generally requires its consent. The founder should understand the downside as well as the hoped-for tax treatment. A low current value does not make the analysis automatic.
- 05
Which current filing instructions control?
This is time-sensitive. Do not copy a date or mailing address from a blog. Use the current IRS form and our 83(b) deadline lookup to verify the official rule, destination, signature, copies, and proof-of-mailing approach for the actual transfer.
- 06
Does the company record match the tax filing?
The company should retain the signed equity documents, approvals, cap table, payment evidence, and its copy of the election. The founder should keep filing evidence with personal tax records. A complete file lets an adviser or investor reconstruct what was issued and when.
What it does not do.
An 83(b) election does not issue shares, approve a transfer, set a valuation, replace a stock purchase agreement, or update the cap table. Those company actions have to happen on their own legal footing.
It is also not the same as a section 83(i) election; the IRS specifically warns that Form 15620 is not used for section 83(i). Nor is it a general election for any founder who owns an LLC. Restricted LLC interests can raise their own classification and valuation questions, so the label on the entity is not enough to answer the tax question.
Use a qualified tax professional and counsel where needed. Corppy can keep the formation and company documents orderly, but this page cannot decide whether an election is right for a specific founder.
Equity paperwork should tell one consistent story.
Start with a clean company record, then let your advisers make the tax decision from real documents.
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