RSA vs RSU
Which Equity Grant is Right for Your Startup?
Restricted Stock Awards and Restricted Stock Units look similar but have fundamentally different tax treatment, ownership rights, and optimal use cases. Here is how to choose.
What are Restricted Stock Awards (RSAs)?
A Restricted Stock Award (RSA) is a direct grant of shares that are issued to you immediately. You own the shares from day one — but the company holds a repurchase right on unvested shares.
As you vest, the company's repurchase right lapses — you truly own those shares free and clear. If you leave before fully vesting, the company can repurchase your unvested shares at the original price.
RSAs are most common at very early stage — founders receiving their founder shares, or seed-stage employees receiving equity at a very low 409A valuation.
RSA tax tip: file an 83(b) election
Because shares are issued immediately, you can file an 83(b) election within 30 days to pay tax now at the current (usually nominal) FMV. All future appreciation is then taxed as capital gains — not ordinary income.
What are Restricted Stock Units (RSUs)?
A Restricted Stock Unit (RSU) is not a share — it is a contractual promise to deliver shares when certain vesting conditions are met.
Until your RSUs vest, you own nothing — no shares, no voting rights, no dividends. When they do vest, the company delivers shares and you immediately owe ordinary income tax on their value.
RSUs became common at late-stage startups and public companies because they have no upfront cost to the employee and avoid the complexity of early exercise decisions.
RSU tax note: ordinary income at vest
RSUs cannot receive an 83(b) election. At vest, the full FMV of the shares is taxed as ordinary income. There is no way to defer or reduce this — plan for withholding.
RSA vs RSU — full comparison
| Feature | RSA | RSU |
|---|---|---|
| When shares are issued | Immediately at grant | Only when vesting conditions are met |
| Ownership from day one | Yes — shares are yours (unvested) | No — RSUs are a contractual promise |
| Voting rights | Yes (from day one) | No (until shares vest and are delivered) |
| Dividends | Yes (if company pays dividends) | Typically dividend equivalents only |
| Tax at grant | FMV of shares is ordinary income (unless 83(b) filed) | No tax at grant |
| Tax at vesting | No tax (if 83(b) filed at grant) | FMV of shares delivered = ordinary income |
| 83(b) election available | Yes — must file within 30 days | No (not applicable) |
| LTCG holding period starts | At grant (if 83(b) filed) | At vest date |
| Common use case | Founders, early employees at seed/pre-seed | Later-stage employees, public companies |
| Strike price / purchase price | Often nominal (e.g., $0.0001/share) | Zero cost to receive shares |
When to use RSAs vs RSUs
Use RSAs when...
- Granting equity to co-founders
- The company is pre-seed or seed stage
- The 409A valuation is very low (nominal stock value)
- The recipient can file an 83(b) election and benefit from it
- You want to give the recipient voting rights immediately
- The company has not yet raised a priced round
Use RSUs when...
- The company is later-stage (Series B+) or public
- The stock price is high — an 83(b) would require a large upfront payment
- Granting equity to employees across jurisdictions with complex tax rules
- Simplicity is a priority — no exercise decisions, no 83(b) complexity
- Granting to international employees (RSUs are more globally portable)
- The company wants consistent withholding at vest
83(b) elections for RSAs
An 83(b) election is a filing with the IRS that instructs it to tax your RSA shares at grant date rather than at each vesting date.
Without an 83(b): you owe ordinary income tax each time shares vest, based on the FMV at that future date. If the company grows, this becomes expensive fast.
With an 83(b): you pay tax once, at the grant date FMV (often very low for early-stage companies). All subsequent appreciation is taxed as capital gains — at a much lower rate, and only when you sell.
83(b) election checklist
- File within 30 days of grant or early exercise — no exceptions
- Send to the IRS by certified mail with return receipt
- Include a copy in your personal tax return for the year
- Give a copy to your company
- Keep a copy for your own records
- Consult a tax advisor before filing — the decision is irrevocable
30-day deadline — no extensions
The IRS does not grant extensions for 83(b) elections. Missing the 30-day window eliminates this option permanently for that grant.
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RSA vs RSU — frequently asked questions
What is a Restricted Stock Award (RSA)?
A Restricted Stock Award (RSA) is an actual grant of shares issued immediately but subject to vesting. The recipient owns the shares from day one but the company retains a repurchase right for unvested shares. RSAs can receive an 83(b) election to pay tax at the current (usually low) FMV.
What is a Restricted Stock Unit (RSU)?
A Restricted Stock Unit (RSU) is a promise to deliver shares when vesting conditions are met. Unlike RSAs, the recipient does not own any shares until they vest. RSUs are taxed as ordinary income at vesting on the FMV of shares delivered.
What is the main difference between RSA and RSU?
RSAs issue shares immediately (with vesting restrictions) and allow 83(b) elections — common at early-stage startups. RSUs are promises of future shares, taxed as ordinary income at vest — common at later-stage or public companies.
Should founders use RSAs or RSUs?
Founders almost always use RSAs with an 83(b) election. This allows founders to receive shares at the company's lowest valuation, pay minimal tax upfront, and start the long-term capital gains holding period immediately.
Track RSAs & RSUs on OpenCap
Manage restricted stock awards and RSUs with automatic vesting schedules, tax summaries, and 83(b) election reminders.