The way it works for founders is that you get actual stock, and vesting is implemented with a repurchase right. The IRS considers the stock to be an &quot;asset at risk&quot;, meaning that you don&#x27;t actually realize the value as income until the repurchase right goes away. Because this happens over time, it practically means founder stock is, by default, treated as being earned every month. This is no big deal in the beginning, but if you change the valuation of the company, suddenly each monthly stock grant has a discrepancy between what you paid for it and what it&#x27;s worth. Therefore, it&#x27;s income, therefore, you owe taxes on it.<p>The way to fix this is an 83(b) election, which lets you say, &quot;No, I&#x27;m taking the risk of this all up front. I want to pay taxes on it, even though the asset is at risk.&quot; In this specific case, it&#x27;s a no-brainer: there are no taxes today, so of course I&#x27;ll pay that $0.<p>If you want to do this with employee options, you have to set up early exercise rights. I think early exercise is done via 83(b) for employees, but I&#x27;m not 100% on that. My company isn&#x27;t big enough that we&#x27;ve had to cross that bridge :)