How To Early Exercise Options For 83(b) Election?
When a shareholder receives stock options in Eqvista, they may exercise those options before vesting is complete.
With the new 83(B) Election, shareholders can pay their taxes on total FMV (Fair Market Value) on restricted securities (including stock options) at the grant issuance date.
Note: The 83(B) Election feature is only available for premium account holders. Kindly upgrade your account to unlock this feature.
The FMV of your company’s shares is calculated using 409A valuation performed by a professional expert like Eqvista. To request, add, edit, and share the FMV, check out our support article here!
Here are the steps to follow:
Step 1: Log into your Eqvista account and select the company account.
On the dashboard, click on “Securities” on the left-hand side to get a drop-down menu and click on “Options”.
Note: The grants issued must be Restricted Stock Awards, Common shares, Preferred shares, or Early Exercised options with vesting schedule to be eligible for 83(B) Election.
Step 2: Once you click, you will be redirected to the following page.
Here, click the option class to get the overview of the class and list of shareholders issued under the class along with details such as grant name, options, price, ownership, and status. In this case, we will click “Option Pool 2” and select “Issue Grants”.
Note: On this page, click on “Create New Class” to create an option class and if you have created one, you can issue options and implement a vesting schedule.
Step 3: Once you click, you will be redirected to the next page where you can issue options from this option pool, implement a vesting schedule, and enable the early exercise option.
Note: You can add a vesting schedule while issuing shares, options, and warrants. In addition to this, you can create your vesting plan or choose from six default plans. To know more about vesting plans, check out the support article here!
Once done, click on “Submit”.
Step 4: With this done, you will be redirected to the options page as shown below.
Then, click the grant name to view the option grant details. In this case, click the grant name “OP2-003”.
Step 5: Here, click on “Actions” on the right-hand side to get a drop-down menu and select “Exercise to equity”.
Step 6: By doing this, a new window will appear. The first step is deciding whether it will be a partial or full exercise.
In this case, we have selected full exercise and the equity class to where the shares would be given. The given exercise price and exercise date will automatically be used for the conversion. If the exercise date is not today, then you can edit it.
Note: After enabling “Early Exercise”, by clicking “Full Exercise”, you can exercise all the options issued to you. Check out the support article to learn more about exercising all the options.
Once done, click on “Submit Exercise”.
Step 7: If you want to see the exercised options, click on “Securities” and then on “Equities”. Once you get here, click on the “Series A” equity class since the options are exercised in this class.
For more details on the grant, click on the grant name “Exer from OP2-003”.
Step 8: Then, you will be redirected to the next page where the option has been exercised.
Step 9: The record of the exercised grant can also be seen by clicking “Cap Table” on the left-hand side to get a drop-down menu. Then, click on “Secondary Transactions” and you will see all the transactions – Exercises, Transfers, Note conversions, Repurchases, and Cancellations.
On this page, click on “Exercises” to check if the grant is exercised.
Once you have issued a grant and early exercised the option, then you can use either the Pre-Filled or Shareholder-Fill Out Form to generate 83(B). Check out the respective support articles to understand them in detail.
Then, the shareholder needs to sign the form and send it to the IRS within 30 days of grant issuance. For more information on Eqvista’s other processes, check out our support articles or get in touch with us today!
