Have you ever thought about why the IRS requires founders and early employees to file an 83(b) election when it seems like an obvious default choice for high-growth startups? It's because not all C Corps are high-growth startups beginning from scratch and planning to expand rapidly.
The 83(b) election informs the IRS that you prefer to be taxed on your shares at the time they are granted, rather than when they vest. By filing this election, you give up the ability to claim a loss on these shares if their value decreases in the future as they vest. However, for a brand-new company with shares valued at just $0.00001-essentially zero-there is little to lose.
While one could imagine a scenario where a grantee might want to keep the option to claim a loss, this is seldom the case for a new startup aiming for high growth.
As always, Carta can help you file your 83(b) when you're ready. You can learn more about how to complete that process here.
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Colleen Lowder
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