This is generally a nice guide for anyone wanting to get an overview of equity compensation issues affecting startup employees.<p>There is one error I caught, where it says that &quot;restricted&quot; stock is called &quot;restricted&quot; owing to the fact that securities laws restrict one&#x27;s right to resell such stock.<p>While it is true that the securities laws do use this terminology to describe the stock of closely-held companies (and in that sense the use of the term of is accurate), all common stock granted in a closely-held company is restricted in this sense, whether or not it is subject to vesting - that is, it must generally be held for a stipulated period as set forth under Rule 144 before it can be resold by the recipient (Rule 144 technically applies only to public company stock but applies by analogy to that of closely-held stock).<p>In the startup context, &quot;restricted&quot; stock refers to stock that is granted to a recipient but made subject to a repurchase option by which the company may repurchase it at cost on termination of a service relationship. That is, the stock is subject to a substantial risk of forfeiture until it vests. For tax purposes, such stock is not deemed to be owned, and is not subject to tax, until the risk of forfeiture goes away (i.e., it vests). This in turn creates a substantial tax risk to the holder of the stock because there is an immediate tax on the value of the spread (difference between what was paid for the stock and its fair market value at each vesting point), a risk that is eliminated if a timely 83(b) election is filed within 30 days of grant but not otherwise.<p>If stock is granted without any vesting requirements (i.e., an outright grant) it is referred to in common startup parlance as an &quot;unrestricted&quot; grant. Such stock is &quot;restricted&quot; stock in the securities law sense that it generally can&#x27;t immediately be resold or transferred without complying with the Rule 144 tests. But this is a technical issue for the lawyers. For every practical purpose relevant to founders and employees, it can be treated, as the street parlance says, as an &quot;unrestricted&quot; grant because there are no vesting requirements.<p>Sorry if this is too technical for this thread. But this is an important technical point that is mis-stated in this guide.<p>A brief observation: when stock options first became widely useful in the startup world in the 1980s, ISOs conferred a huge benefit to employees because you could be assured that you could exercise them when they vested without any practical tax risk whatever. Over the years, however, AMT, though first enacted in the 1960s as a &quot;millionaire&#x27;s tax&quot; to ensure that the wealthy could not easily manipulate tax deductions to avoid paying any tax whatever, evolved into a general catch-all tax that is now used to fill serious deficiencies in the U.S. tax code and that now ensnares many people making pretty average incomes. Once that happened, it effectively killed many of the once-very-special tax advantages of ISOs for employees and turned ISOs into a form of equity compensation that is only slightly more favorable for employees and is often a real disadvantage (for example, the notorious 90-day tail for exercising vested options on termination of employment derives directly from tax-code rules imposed as special restrictions on ISOs alone but today functions to entrap many employees into having to stay in undesirable employment situations far beyond what they intended on pain of losing their vested options altogether if they quit).<p>A final theoretical observation on best types of grants in order of preference: first, unrestricted grants (here, you own it all and can&#x27;t theoretically ever lose it and you usually have zero tax risk while trying to hold for long-term capital gains); second, restricted stock at a cheap price with a timely 83(b) election (while it vests, and you can forfeit it, the tax picture is near-ideal in giving you a path to long-term capital gains tax treatment with no landmines along the way); third, ISOs with a low strike price and an early exercise privilege (with these, you exercise early, file an 83(b) election, and in effect get the equivalent of a restricted stock grant); fourth, ISOs or NQOs without a 90-day tail on termination (these give you maximum flexibility to trying to work around or at least postpone potentially detrimental tax events while being able to wait as long as 10 years before being at risk of losing vested options); fifth, and worst of all from a tax standpoint, RSUs (which really are a super-high-value startup&#x27;s way of granting very nice bonuses to employees in situations where the very high price of its stock makes it tax-prohibitive to use any other more favorable equity compensation vehicle). Of course, this is theoretical only and you get what you get in the real world depending on whether you are a founder, an early-stage employee, or a later-stage employee and depending as well on what is negotiated with investors concerning any restrictions they may insist upon as conditions to their investments.<p>Just a few thoughts on what is, overall, a nice guide to equity compensation.