Module
RSUs
5 min read
What RSUs are
Restricted Stock Units. A promise of future shares at no cost. You don't pay anything to get them. You pay tax when they're delivered.
Single trigger vs double trigger
At public companies, RSUs typically have a single trigger: time vesting. As they vest, shares get delivered and taxes get withheld. At private companies, RSUs almost always have a double trigger: time vesting AND a liquidity event (acquisition, merger, or some number of days post-IPO). Both have to happen before shares deliver. The reason is tax: without a market, you'd owe ordinary income tax on shares you can't sell.
Withholding and what you actually receive
At settlement, the full FMV is treated as ordinary income. Most companies withhold by selling enough of your shares to cover taxes. So if you vest 100 RSUs at $50 and your withholding rate is 35%, you end up holding around 65 shares. The rest were sold for taxes.
RSUs vs options
RSUs are always worth something at vest (assuming the stock has any value). Options can go to zero if the strike is above market. Options have more upside if the company grows a lot. RSUs have less risk and less upside. The right answer depends on the company stage and your risk tolerance.
Educational only. Not tax, legal, or financial advice. Talk to a qualified advisor.