Some employers offer restricted stock units (RSUs) as part of employee compensation. Have you recently received a job offer or compensation structure that involves RSUs, and need to better understand how they work?

This type of equity compensation is becoming increasingly common and can offer valuable upside, but also carries additional risks. Understanding the unique tax structure of RSUs is straightforward, but there are some smarter tax decisions you can choose to make only when the stock is first granted.

What Are RSUs?

Restricted stock units (RSUs) are a form of employee compensation most typically issued by companies in high-growth industries. RSUs allow an employee to participate in equity ownership (stock) in their firm which can provide significant upside if the company continues to grow and prosper.

Single Trigger RSUs (Time Vesting) Single trigger RSUs vest your shares based on a specific time schedule. Single trigger RSUs can be classified as graded or cliff depending on the structure of the vesting schedule.

Double Trigger RSUs (Time + Performance-Based Vesting) These double-trigger RSUs include time vesting in addition to a liquidity event trigger.

What happened to RSUs If You Leave Your Company? If you have not yet vested all of your RSUs and you leave your company, you will usually forfeit any unvested shares.

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