U.S. – Business : Restricted stock units (RSU)
What every founder needs to know about RSUs, taxation at vesting, and mobility tax risks. Learn how RSUs work before you issue them.
Restricted Stock Units (RSUs): What Founders Should Know Before Granting Them
Restricted Stock Units (RSUs) are one of the most popular equity awards for growing companies. They’re easy to understand, easy to administer, and employees appreciate their simplicity. But RSUs come with important tax rules that every founder and entrepreneur should know.
RSUs Are Taxed at Vesting — Not at Grant
Unlike restricted stock, RSUs do not deliver actual shares until they vest. Because the employee doesn’t receive property upfront, they cannot file a Section 83(b) election.
This means:
- RSUs always trigger ordinary income at vesting
- Tax is based on the fair market value at vesting
- Your company must withhold federal, state, and payroll taxes
- This can create a surprise tax bill for the employee and administrative complexity for the employer.
Mobility Tax Complications
If an employee works in multiple states — or countries — between grant and vesting, RSUs become taxable in each jurisdiction proportionally. This can lead to:
- Multi-state filings
- Trailing tax liabilities
- Possible double taxation
- W-2 mismatches and corrections
This is one of the most common RSU problems founders overlook.
RSUs Work Best for Later-Stage Companies
RSUs are ideal when the company’s valuation is higher and you want cleaner, later-stage equity incentives without early-stage valuation challenges.
Before you grant RSUs, get expert guidance on vesting design, withholding strategy, and mobility tax rules.
👉 Schedule a tax strategy call with Aimlon CPA P.C.
👉 Ensure your RSUs don’t create unintended tax liabilities
👉 Support your team with smart equity planning
