# Founder stock, vesting and the 83(b) election

> Authorized versus issued shares, par value, a restricted stock purchase at $0.0075, four-year vesting with a one-year cliff, and the 83(b) election — on Northwind's founders.

Source: https://lopifi.com/learn/founder-stock-and-vesting
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How should startup founders issue themselves stock, and how does founder vesting work?** Authorized versus issued shares, par value, a restricted stock purchase at $0.0075, four-year vesting with a one-year cliff, and the 83(b) election — on Northwind's founders.

Northwind's certificate of incorporation [authorizes](https://lopifi.com/md/glossary/authorized-shares) 10,000,000 shares of [common stock](https://lopifi.com/md/glossary/common-stock) with a [par value](https://lopifi.com/md/glossary/par-value) of $0.00001. On September 1, 2026 the board issued 8,000,000 of them, 4,000,000 to each founder, at $0.0075 a share — $30,000 each, the $60,000 the accounting track posts as JE-1. The other 2,000,000 stay authorized and unissued, for the option pool and the rounds to come.

> **Founder stock is bought, not given: a tiny price paid in cash, on a restricted stock purchase agreement that vests, followed by an 83(b) election within 30 days.**

| Count | What it holds | Northwind today |
| --- | --- | --- |
| Authorized | The charter's ceiling. Nobody holds it | 10,000,000 |
| Issued and outstanding | Shares actually sold — the founders' | 8,000,000 |
| Fully diluted | Issued, plus every option and the unissued pool | 9,000,000 |

Three counts of the same company. Every ownership percentage names which one it is.

Delaware lets stock with a par value be issued for any consideration not less than par. A par of $0.00001 means the floor on 8,000,000 shares is $80: the founders paid more, and on a ledger with an [APIC](https://lopifi.com/md/glossary/apic) account the $60,000 splits into $80 of common stock at par and $59,920 of additional paid-in capital. The [franchise tax lesson](https://lopifi.com/md/learn/delaware-franchise-tax-calculation) shows why a low par and a large authorized count still produce a small tax.

> “Shares of stock with par value may be issued for such consideration, having a value not less than the par value”

— [8 Del. C. §153(a)](https://delcode.delaware.gov/title8/c001/sc05/index.html), Stock is issued for at least its par value; §151 classes, §152 consideration, §157 options

## Four years, one-year cliff

Each founder's shares are [restricted stock](https://lopifi.com/md/glossary/restricted-stock) under a stock purchase agreement that lets Northwind buy back unvested shares if the founder leaves. They [vest](https://lopifi.com/md/glossary/vesting) over 48 months with a one-year [cliff](https://lopifi.com/md/glossary/vesting-cliff): nothing until September 1, 2027, then 1,000,000 at once, then about 83,333 a month until September 1, 2030. Vesting protects each founder from the other: a co-founder who walks away in month six doesn't keep half the company.

*[Figure: vesting]*

A founder's 4,000,000 shares one month past the cliff. Each step is a month; the first tall one is the cliff's quarter.

**Northwind — A co-founder leaves in month 18.** A founder leaves after 18 months. 1,500,000 shares have vested and are hers to keep. The other 2,500,000 are unvested, and the agreement lets Northwind repurchase them — at the price she paid, that is $18,750. The repurchase price is whatever the agreement says; it is set the day the stock is bought, not the day someone leaves.

## The 83(b) election

Restricted stock is taxed under §83 when it vests, at its value then. Filed within 30 days of the purchase, an [83(b) election](https://lopifi.com/md/glossary/83-b-election) taxes it at purchase instead — and a founder who paid fair value has $0 of income. Northwind's founders bought on September 1, 2026, so the deadline was October 1, 2026. Without it, the cliff alone would have been $52,500 of ordinary income each at the value Northwind's November appraisal puts on the stock. [How to file it](https://lopifi.com/md/learn/founder-stock-and-vesting/83b-election) is its own page.

> “shall be made not later than 30 days after the date of such transfer.”

— [26 U.S.C. §83(b)(2)](https://www.law.cornell.edu/uscode/text/26/83), Property transferred for services, and the 83(b) election's 30 days

**Wrong:** "We each own half" in an email, shares never issued, no vesting, no election.

**Right:** Board consent issues 4,000,000 shares each at $0.0075; founders pay $30,000 each; 83(b) filed by October 1, 2026.

The paper trail is what diligence checks first: a charter, a board consent issuing the shares, a signed purchase agreement, proof of payment and the 83(b) election with proof of filing.

In this lesson: how to file the 83(b) election, and what single- and double-trigger acceleration do to unvested shares at a sale.

## Pages in this lesson

- [The 83(b) election, step by step](https://lopifi.com/md/learn/founder-stock-and-vesting/83b-election) — 7 min. How do I file an 83(b) election, and what happens if I miss the deadline?
- [Single- and double-trigger acceleration](https://lopifi.com/md/learn/founder-stock-and-vesting/single-and-double-trigger-acceleration) — 5 min. What is single-trigger vs double-trigger acceleration?

## Where this lesson's rules come from

- [8 Del. C. §153(a)](https://delcode.delaware.gov/title8/c001/sc05/index.html) — Stock is issued for at least its par value; §151 classes, §152 consideration, §157 options (state)
- [26 U.S.C. §83(b)(2)](https://www.law.cornell.edu/uscode/text/26/83) — Property transferred for services, and the 83(b) election's 30 days (statute)
- [Wikipedia, “Vesting”](https://en.wikipedia.org/wiki/Vesting) — Vesting, cliffs and single- and double-trigger acceleration — background (reference)
- [Form 15620 (Rev. 4-2025), Instructions — When to File](https://www.irs.gov/pub/irs-pdf/f15620.pdf) (PDF) — Section 83(b) Election (PDF) (form)

## Read further

- https://lopifi.com/md/journal-entries/issuing-common-stock
- https://lopifi.com/md/startups/stock-options-409a-and-vesting
- https://lopifi.com/md/accounting/83b-election
- https://lopifi.com/md/accounting/cap-table
- https://lopifi.com/md/docs/domain/11-lexicon

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Lesson:** Lesson 1 of 10 — 10 min
- **Terms taught:** [Authorized shares](https://lopifi.com/md/glossary/authorized-shares), [Par value](https://lopifi.com/md/glossary/par-value), [Common stock](https://lopifi.com/md/glossary/common-stock), [Restricted stock](https://lopifi.com/md/glossary/restricted-stock), [Vesting](https://lopifi.com/md/glossary/vesting), [Vesting cliff](https://lopifi.com/md/glossary/vesting-cliff), [83(b) election](https://lopifi.com/md/glossary/83-b-election)
- **Previous:** [The monthly board pack, Finance · Lesson 8](https://lopifi.com/md/learn/monthly-board-pack)
- **Next:** [The 83(b) election, step by step](https://lopifi.com/md/learn/founder-stock-and-vesting/83b-election)
- **The course:** https://lopifi.com/md/learn