What is Restricted Stock Unit (RSU)?
A promise of shares that convert to real stock as they vest - no strike price to pay.
Restricted Stock Unit (RSU): definition
Unlike stock options, which give the right to buy shares at a strike price, an RSU is an outright promise of shares once it vests. Because there is nothing to purchase, RSUs always have value at vesting (as long as the stock is worth anything), which makes them popular at later-stage and public companies. They are taxed as ordinary income on the fair value at vesting.
- No strike price - the employee receives shares outright at vesting
- Always has value at vesting if the stock has value
- Taxed as ordinary income on the fair value when it vests
- Common at later-stage and public companies
How Fintra handles it
Fintra tracks RSU grants and vesting on the cap table and recognizes their ASC 718 expense over the vesting period, posting to the GL. At vesting, the shares convert on the cap table and the taxable event is recorded for payroll withholding - because equity, accounting, and payroll share one platform, the RSU flows cleanly from grant to vest to tax without hand-offs.
Worked example
Frequently asked questions
What is the difference between an RSU and a stock option?
An option gives the right to buy shares at a fixed strike price; you profit only if the stock rises above it. An RSU is a promise of shares outright, with no purchase - so it retains value even if the stock price falls, as long as it is above zero.
How are RSUs taxed?
RSUs are taxed as ordinary income on the fair market value of the shares when they vest, with tax withholding at that point. Any subsequent gain or loss when you sell is a capital gain or loss. Fintra records the vesting event for payroll withholding.
Why do companies grant RSUs instead of options?
RSUs always have value at vesting (options can go underwater if the price falls below the strike), so they are attractive at later-stage and public companies with established, higher valuations. Early startups more often grant options because of the low strike price and upside.
How does Fintra account for RSUs?
Fintra tracks RSU grants and vesting on the cap table, recognizes ASC 718 expense over the vesting period to the GL, and records the taxable vesting event for payroll withholding - all on one shared platform.
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