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What are the different types of restricted stock?

There are two types of restricted stock: restricted stock units (RSUs) and restricted stock awards (RSAs). Restricted stock differs from stock options in that restricted stock equals shares of ownership, and stock options are contracts to purchase shares of stock at a future date. As a result, each has different tax implications.

What are restricted stock units?

Restricted stock units are a type of compensation in which an employee receives shares of stock that are paid out over a period of years. Restricted stock units fluctuate in value over time. From a company’s perspective, restricted stock units can help employee retention by incentivizing employees to stay with the company long-term.

What is a restricted stock award?

A restricted stock award is like an RSU. However, it comes with voting rights because the employee owns the stock immediately once it is awarded. In addition, though an RSU represents a right to stock, in some cases, an employee can elect to receive the cash value of the RSU instead.

What is restricted stock?

Restricted stock typically becomes available for sale under a graded vesting schedule that lasts several years. Restricted stock is called “letter stock” or “section 1244 stock” (the part of the Internal Revenue Code [IRC] that covers them). Restricted stocks are nontransferable shares issued to employees as a form of compensation.

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