Restricted stock unit (RSU)

What is restricted stock unit (rsu)?

A restricted stock unit (RSU) is a company promise to give you shares once you vest, no purchase, no strike price. When they vest, the shares' value is taxed as ordinary income, like salary. RSUs are common at later-stage and public companies; early startups usually grant stock options instead.

Why it matters for fast-growing companies

RSUs are simpler than options, there's nothing to buy, but they create a tax bill at vesting whether or not you can actually sell the shares. At private companies, many RSUs use double-trigger vesting (time plus a liquidity event) precisely so employees aren't taxed on illiquid stock. If you're moving from options to RSUs, model the withholding carefully.

Related terms

• Fundraising & equityISO vs NSO (stock options)ISOs and NSOs are the two kinds of stock options.
• Fundraising & equityVesting scheduleA vesting schedule is the timeline over which someone earns their equity, rather than owning it all at once.
• Fundraising & equityOption poolAn option pool is a block of shares a company reserves to grant as equity to employees, advisors, and future hires.
• Tax & credits83(b) electionAn 83(b) election tells the IRS to tax restricted stock at its (usually tiny) value on the grant date rather than as it vests.

Frequently asked questions