Founder stock, vesting, and 83(b)

LAST REVIEWED 2026-08 · SOURCED FROM 3 SESSIONS, JAN–MAY 2026

TL;DR

Incorporate as a Delaware C-corp, issue founder common stock at a fraction of a cent while the company is worth nothing, put every founder on 4-year vesting with a 1-year cliff, and file the 83(b) election within 30 days of any restricted stock grant. Miss that window and you’re taxed on paper gains at every vest. Never compensate anyone with SAFEs, and never call helpers “volunteers.”

Set up the stock while it’s worthless

Issue founder common stock at incorporation, at par value — a purchase check of tens of dollars. Delaware C-corp is the default for venture-scale companies, and it preserves QSBS: up to $15M of gain excluded from federal tax at exit, a benefit LLCs never get.

Do it now, not after the first traction. The whole equity machine works because the stock starts cheap.

Vesting protects the company from its own founders

Standard is 4 years, monthly, with a 1-year cliff — 25% at the one-year mark, monthly after. Every founder goes on it, including you.

“If you don’t impose vesting… someone quits, then they can walk off with 25% of the company. And then you can become unfundable if you have a bunch of dead equity.”

— Startup securities attorney, 15 years of practice · session, Jan 2026

Related mechanics from the sessions:

• A solo founder with fully-vested shares doesn’t need to re-impose vesting preemptively. If a VC makes it a closing condition, the answer is: “Happy to do so. I want your money” — then file a protective 83(b) on the new restriction.
• A new co-founder gets newly issued shares (everyone dilutes), not a transfer from your stack.
• Acceleration: single-trigger on change of control for founders; double-trigger for employees — acquirers want the retention hook, and next-round investors will expect the distinction.
• On departure, the company repurchases unvested shares at original issue price — and yes, technically you cut the check.

The 83(b) election: a 30-day, no-extensions deadline

When you receive stock subject to vesting, the IRS default taxes you on the fair market value of each tranche as it vests — at whatever the stock is worth then, in a year when you have no cash to pay it.

“You get taxed on the fair market value of the stock at each vesting period… it’d be too painful to bear.”

— Startup securities attorney · session, May 2026. The example given: 250K shares vesting at $10/share is $2.5M of paper taxable income.

The 83(b) election flips the tax event to the grant date, when the stock is worth almost nothing. File within 30 days of the grant. There are no extensions, and a missed filing is a classic diligence ding that follows the company for years. Start capital-gains holding early too: that’s the difference between 15% capital gains and ordinary income rates later.

Never pay people in SAFEs. Never use the word “volunteer.”

Two traps that showed up repeatedly across sessions:

Compensating with SAFEs. A SAFE is an IOU for preferred stock. Handing one to a contractor or advisor as payment creates taxable income at its stated value — with no cash to pay the tax. Use common stock or options instead.

“Volunteers.” If someone contributes work without consideration, their IP assignment is arguably invalid — meaning your helpful early “volunteer” may own part of your product.

“You never want to use the word volunteers with people who are helping you build the company and develop IP.”

— Startup securities attorney · session, Jan 2026

Paper everyone: contractor agreement plus equity, real consideration, IP assignment signed. The corollary horror story from another session: an early contractor who never signed an IP assignment owns their code by default — and has holdup power on the eve of your financing.

Numbers from the room

Figure	Value
Standard founder vesting	4 years, monthly, 1-year cliff
83(b) deadline	30 days from grant, no extensions
Founder stock purchase at incorporation	Par value — typically $20–100 total
QSBS federal gain exclusion (C-corp only)	Up to $15M
Post-termination option exercise window	90 days (default)
Early CTO joining at formation	10–20%; post-raise more like 3–5%
Option pool to reserve	~10–15%

Sources

Three working sessions with a startup securities attorney (Jan and May 2026, two in January), covering restricted stock, 83(b) mechanics, vesting design, and cap-table hygiene. Benchmark data referenced: Carta compensation benchmarks, YC startup documents.