Visualize your equity vesting over time and understand your ownership milestones
Equity compensation has become a cornerstone of modern business, especially in the startup world. This Equity Vesting Schedule Calculator helps founders, employees, and investors visualize and plan equity vesting over time, transforming complex vesting terms into clear visualizations and precise schedules.
Equity vesting is the process by which a company grants ownership interests (equity) to employees, founders, or other stakeholders over time, rather than all at once. The equity recipient gradually "earns" their full allocation by continuing their relationship with the company for a specified period.
Vesting creates alignment between the recipient's long-term interests and the company's success, while protecting the company if someone leaves early. For startups and growing businesses, this alignment is particularly crucial during the challenging early years when cash compensation might be limited.
When founders, employees, or advisors know their equity increases in value over time, they're more likely to make decisions that benefit the company's long-term health rather than seeking short-term gains.
A well-structured vesting schedule protects the company and other stakeholders from scenarios where someone receives equity and then promptly leaves, avoiding complex buyback negotiations.
In competitive talent markets, thoughtfully designed equity packages can be a powerful differentiator. Companies that clearly articulate their equity strategy have an advantage in recruitment.
Understanding when equity vests helps with personal financial planning, tax preparation, and making informed decisions about job offers and career moves.
This calculator takes your equity grant details and generates a complete vesting schedule visualization. Enter your grant date, equity amount, vesting period, cliff period, and vesting frequency to see exactly when and how much equity vests over time.
The calculator supports various vesting structures including linear (equal portions), front-loaded (more vests earlier), and back-loaded (more vests later) schedules. It also models acceleration provisions for change of control scenarios.
Different business contexts call for different vesting approaches. Understanding the various structures helps you design equity packages that align with your company's goals and employee needs.
This is the most common structure in tech companies: no vesting for the first year, 25% vests at the one-year mark, and the remainder vests monthly or quarterly over the next three years.
Best for: General employee equity grants in venture-backed startups. This structure is expected by investors and employees alike, making it the safest default choice.
Equity vests in equal portions over the vesting period. With a 4-year schedule and monthly vesting, approximately 2.08% vests each month. This creates a steady, predictable increase in ownership.
Best for: Standard employee grants where you want simple, predictable vesting that employees can easily understand and plan around.
More equity vests in earlier years than later years. For example, 40% might vest in year one, 30% in year two, 20% in year three, and 10% in year four.
Best for: Recruiting key hires who need immediate meaningful ownership, or when you want to reward early contributions more heavily.
More equity vests in later years than earlier years, increasing the incentive to stay longer. For example, 10% in year one, 20% in year two, 30% in year three, and 40% in year four.
Best for: Retention-focused grants in established companies, or roles where long-term institutional knowledge is particularly valuable.
Instead of time-based vesting, equity vests upon achievement of specific business or performance goals. This could include revenue targets, product launches, or fundraising milestones.
Best for: Strategic advisors, consultants with specific deliverables, or key hires whose value is tied to achieving specific outcomes.
Founders typically use 4-year vesting with or without a cliff, often with acceleration provisions for acquisition scenarios. Some founders negotiate for credit of time already spent building the company.
Best for: Co-founder relationships where you want to ensure ongoing commitment but also acknowledge the founding contribution.
Combines time-based and milestone-based vesting criteria. For example, 50% might vest over time, while 50% vests upon hitting specific targets.
Best for: Executive hires or roles where both tenure and performance matter equally for success.
Understanding the different types of equity compensation is essential for both employers designing packages and employees evaluating offers. Each type has distinct characteristics, tax implications, and strategic uses.
Stock options give the holder the right to purchase company shares at a predetermined price (the "strike price" or "exercise price") within a specified time period.
RSUs represent a promise to deliver shares upon vesting. Unlike options, RSUs have value even if the stock price doesn't increase above the grant date value.
Restricted stock is actual company shares granted with transfer restrictions that lapse upon vesting. Unlike RSUs, you own the shares from day one (though you can't sell until vested).
Phantom equity provides cash payments tied to company value without actual ownership. The recipient receives the economic benefit of ownership without the legal ownership.
For LLCs, profits interests give the holder a share of future profits and appreciation, but not existing value at the time of grant.
ISOs for employees, NSOs for advisors, restricted stock with 83(b) elections for founders. Low valuations make 83(b) elections attractive.
Mix of ISOs and RSUs for employees. RSUs become more attractive as valuations rise and the spread on options increases.
Primarily RSUs due to liquidity, simpler tax handling, and guaranteed value. Stock options less common except for executives.
Profits interests or phantom equity to avoid complex tax issues with actual equity grants in pass-through entities.
Acceleration provisions allow unvested equity to vest earlier than the scheduled vesting date under certain triggering events. These provisions are important protections for equity holders, particularly in acquisition scenarios.
Single trigger acceleration causes unvested equity to vest immediately upon a single event, typically a change of control (acquisition or merger).
Common percentage: 25-100% of unvested equity, with 100% being typical for founders
Double trigger acceleration requires two events to occur: typically a change of control AND a subsequent adverse employment action (termination without cause or resignation for good reason).
Good reason typically includes: significant reduction in duties, material pay reduction, forced relocation, or material breach of employment agreement.
A change of control typically includes:
The exact definition varies by agreement and should be carefully reviewed.
Termination without cause means the company ends your employment for reasons other than misconduct, poor performance, or violation of company policies. Specific "cause" definitions vary but typically include:
All unvested equity vests immediately. Common for founders and C-suite executives. Provides maximum protection but may concern buyers.
Half of unvested equity vests. Provides meaningful protection while maintaining some retention incentive post-acquisition.
12 months of additional vesting occurs immediately. A middle-ground approach that's proportional to service time.
Acceleration percentage increases based on tenure. For example, 25% after year 1, 50% after year 2, 100% after year 3.
When negotiating acceleration provisions, consider:
Equity compensation involves complex tax considerations that vary significantly by equity type, timing of exercise, and holding periods. Understanding these implications is essential for making informed decisions about your equity.
Companies typically handle RSU tax withholding by "selling to cover" - withholding some shares to cover taxes - or "net settlement" - delivering fewer shares.
For restricted stock (not RSUs), employees can file an 83(b) election with the IRS within 30 days of grant to be taxed on the grant value immediately rather than on the potentially higher value at vesting.
Critical: The 83(b) election must be filed with the IRS within 30 days of the grant date. This deadline cannot be extended and missing it means you cannot make the election.
Exercising options before they vest (if permitted) starts your capital gains holding period earlier and may reduce AMT impact for ISOs.
For ISOs, strategically time exercises across tax years to manage AMT exposure. Consider exercising when spread is smaller.
Shares in qualifying small businesses may be eligible for up to 100% federal capital gains exclusion (up to $10M or 10x basis).
Donating appreciated shares to charity can avoid capital gains tax while providing a deduction for full FMV.
State tax treatment varies significantly:
Implementing vesting schedules involves several legal considerations that vary by equity type and business structure. Proper documentation and compliance are essential to avoid disputes and regulatory issues.
Vesting terms should appear in multiple documents to ensure clarity and enforceability:
Equity grants must comply with federal and state securities laws. Most private companies rely on exemptions from registration requirements:
Provides an exemption for compensatory equity grants by private companies. Key requirements:
Section 409A of the Internal Revenue Code requires that stock options be granted with an exercise price at or above fair market value to avoid adverse tax consequences:
Equity grants require proper corporate authorization:
These dates are not always identical and have important legal implications:
A comprehensive vesting agreement addresses how different departure scenarios affect equity:
Typically unvested equity is forfeited. For options, vested options usually must be exercised within 90 days or they expire.
Same as voluntary resignation unless agreement provides for acceleration or extended exercise periods.
May result in forfeiture of all equity (vested and unvested) depending on agreement terms. Often includes clawback provisions.
Often triggers acceleration of some or all unvested equity. Extended exercise periods for options are common.
For companies with international employees:
Comprehensive answers to common questions about equity vesting schedules, structures, and strategies.
Equity vesting is the process by which ownership interests are earned over time rather than granted all at once. It matters because it aligns incentives between the company and equity holders, protects the company if someone leaves early, serves as a retention tool, and is expected by investors in venture-backed companies. Without vesting, someone could receive equity and immediately leave, retaining ownership without contributing to the company's success.
A cliff is the initial period during which no equity vests. At the cliff date, a portion of the total grant vests immediately. The most common cliff is one year with 25% vesting. The cliff serves as a trial period - if someone doesn't work out within the first year, they leave with no equity. This protects the company from bad hires retaining meaningful ownership and avoids complex cap table cleanup.
The grant date is when equity is legally awarded, requiring board approval and establishing the strike price for options. The vesting commencement date is when the vesting clock starts ticking. These can be different - for example, if a board approves a grant in March but backdates vesting to January when the employee started. Both dates have legal and tax significance and should be clearly documented.
The industry standard is 4-year vesting with a 1-year cliff and monthly vesting thereafter. Under this schedule: no equity vests during the first year; at the 1-year mark, 25% vests immediately (the cliff); the remaining 75% vests monthly over the next 36 months (approximately 2.08% per month). This structure is so common that deviations may need explanation to candidates and investors.
Generally, unvested equity is forfeited when you leave, regardless of whether you resign or are terminated. Only vested equity remains yours. However, treatment varies based on your agreement - some provide partial acceleration for termination without cause. For stock options, vested options typically must be exercised within 90 days of departure or they expire. Some companies offer extended exercise windows (up to 10 years) as an employee benefit.
Incentive Stock Options (ISOs) are only available to employees and offer potential tax advantages - no regular income tax at exercise, with gains potentially qualifying for long-term capital gains treatment. Non-Qualified Stock Options (NSOs) are available to anyone and are taxed as ordinary income at exercise on the spread. ISOs have a $100,000 annual limit and specific holding requirements, while NSOs have no such limits. Most companies grant ISOs to employees (up to the limit) due to the tax benefits.
Restricted Stock Units (RSUs) are a promise to deliver shares upon vesting, with no cost to the recipient. Options give you the right to purchase shares at a set price. Key differences: RSUs always have value at vesting (you receive shares worth the current FMV); options are only valuable if the stock price exceeds the strike price; RSUs are taxed at vesting while options are taxed at exercise; RSUs are simpler to understand. RSUs are more common at later-stage and public companies.
Restricted stock is actual company shares granted with restrictions that lapse upon vesting. An 83(b) election allows you to pay tax on the grant date value rather than waiting until vesting when the value may be much higher. This is advantageous for early-stage companies where shares have low value at grant. The election must be filed with the IRS within 30 days of grant - this deadline is absolute. The risk is that if you forfeit the shares before vesting, you can't recover the taxes paid.
Phantom equity provides cash payments tied to company value without actual ownership. The recipient receives the economic benefit of equity appreciation without being a shareholder. This is often used by LLCs, S-corps, or companies that want to provide equity-like compensation without issuing actual shares. Benefits include simpler cap table management, no securities law compliance for share issuance, and flexibility in payout terms. It's taxed as ordinary income when paid out.
Single trigger acceleration causes unvested equity to vest upon a single event (typically acquisition). Double trigger requires two events: usually acquisition AND subsequent termination without cause or resignation for good reason. Double trigger is preferred by acquirers and investors because it maintains retention incentives post-acquisition. Single trigger is more common for founders and key executives who may be at greater risk of being pushed out after an acquisition.
Without acceleration provisions, unvested equity typically remains unvested under the same schedule, though the acquirer may substitute its own equity. Common scenarios include: assumption of vesting by acquirer (you continue vesting in new company's stock), cash-out (all vested equity paid out, unvested may be canceled or continued), acceleration per your agreement terms, or conversion to RSUs in the acquiring company. Your specific outcome depends on your grant agreement and the acquisition terms.
Yes, but with important caveats. Modifying vesting terms requires consent from the equity holder, proper board approval, formal written amendments, and consideration of tax implications. Accelerating vesting is generally easier than extending it or adding restrictions. Unilaterally extending vesting or adding conditions may require new consideration (something of value) to be enforceable. Changes should be documented formally, not just discussed verbally.
Good leaver/bad leaver provisions differentiate treatment based on departure circumstances. Good leavers (retirement, disability, death, termination without cause) often keep vested equity at fair value. Bad leavers (resignation, termination for cause) may face forfeiture of some or all equity, or be required to sell back at a discount. These provisions are common in private equity-backed companies and some venture situations. Review your agreement carefully to understand how your departure would be categorized.
The optimal exercise timing depends on multiple factors: your cash situation (can you afford the exercise cost and taxes?), tax implications (ISO vs NSO, AMT exposure), your belief in the company's future value, liquidity timeline, and diversification goals. For ISOs, exercising and holding can provide capital gains treatment but creates AMT exposure. Early exercise of unvested options (if permitted) starts your holding period earlier. Consider consulting a tax advisor before making significant exercise decisions.
The Alternative Minimum Tax (AMT) is a parallel tax system that affects ISO exercises. When you exercise ISOs, the spread (FMV minus strike price) is an AMT preference item that can trigger AMT liability even though you don't owe regular income tax. This can create a tax bill without any cash to pay it (since you haven't sold the shares). Strategies to manage AMT include: exercising when the spread is small, spreading exercises across multiple years, and ensuring you can cover potential AMT if exercising significant amounts.
Qualified Small Business Stock (QSBS) under Section 1202 can provide up to 100% exclusion of federal capital gains tax on shares held 5+ years, up to $10 million or 10x your basis. To qualify, the company must be a C-corporation with assets under $50M at issuance, you must acquire shares directly (not on secondary market), and the company must meet active business requirements. Many startup shares qualify if properly structured. The tax savings can be enormous - consult a tax professional to confirm your eligibility.
Tax planning for equity should include: understanding your equity type and its tax treatment, tracking vesting dates and planning for tax obligations, considering 83(b) elections for restricted stock within the 30-day window, managing ISO exercises to minimize AMT exposure, planning for liquidity events and the associated tax bills, considering state tax implications (especially if you've moved), and maintaining records of cost basis, grant dates, and exercise dates. Working with a tax professional familiar with equity compensation is highly recommended.
Yes, founder vesting is strongly recommended and often required by investors. It protects all founders if one leaves early, demonstrates commitment to investors, prevents a departed founder from retaining a large ownership stake without contributing, and is standard practice that investors expect. Typical founder vesting is 4 years, often with credit for time already invested (e.g., if you've been building for 1 year, you might start 25% vested). Some founders negotiate no cliff or a shorter cliff given their existing commitment.
Co-founder equity should reflect relative contributions, commitment levels, and roles. Key considerations include: vesting schedules for all founders (even if they're equal partners), what happens if a founder leaves early, intellectual property assignments, full-time commitment requirements, and decision-making around future equity grants. It's crucial to have these conversations early and document agreements formally. Consider working with an attorney to create a founders' agreement that addresses these issues before they become contentious.
Executives should consider negotiating: double trigger acceleration (typically 50-100% of unvested upon acquisition + termination), extended exercise periods post-departure (beyond the standard 90 days), protection against dilution or down-rounds, clear definitions of "cause" and "good reason," and severance that includes continued vesting or acceleration. Your leverage depends on your role's criticality, the company stage, and market conditions. Later-stage companies may have less flexibility, while early-stage companies may accommodate more customization.
When evaluating equity, consider: the percentage of company you're being offered (not just share count), the current 409A valuation and recent funding valuations, the vesting schedule and any acceleration provisions, the company's funding stage and path to liquidity, dilution expectations from future funding rounds, and the equity type (options vs RSUs) and associated tax implications. Ask about the total shares outstanding, the option pool size, and recent valuations. Model different exit scenarios to understand potential value. Remember that early-stage equity is high risk - discount heavily for uncertainty.
You should receive: the company's Equity Incentive Plan document, an individual Grant Agreement or Stock Option Agreement specifying your grant terms, a copy of the company's 409A valuation (for options), any applicable stockholder agreement you'll be bound by, and clear instructions for exercise procedures (for options). Review all documents carefully before signing. If anything is unclear or differs from what was discussed, ask questions before signing. Keep copies of all documents for your records.
A 409A valuation is an independent appraisal of a private company's common stock fair market value, required for setting option strike prices. If options are granted below FMV, serious tax consequences apply to the recipient (immediate taxation plus 20% penalty). Companies typically obtain 409A valuations annually or after significant events (funding rounds, major contracts). The 409A value is typically lower than the preferred stock price investors pay, reflecting the differences between common and preferred stock.
No, vesting is not legally required - companies can issue fully vested equity. However, vesting is strongly advisable because it protects the company and other shareholders, is expected by investors (often required in investment terms), aligns incentives over time, and provides flexibility if relationships don't work out. Issuing fully vested equity to new employees creates risk that they could leave immediately while retaining significant ownership, which is unfair to remaining team members and creates cap table complications.
In bankruptcy, common stockholders (which includes most employee equity) are last in line for any remaining value after creditors and preferred stockholders are paid. In most cases, this means common equity becomes worthless. Unexercised options typically expire worthless. If you've exercised options and hold shares, you're a shareholder and may receive something if there's value remaining after senior claims, but this is rare. The practical reality is that equity in a bankrupt company is usually worth nothing.
Need personalized guidance on equity vesting, stock option exercises, or compensation negotiation? I offer consultations for California clients on equity compensation and startup legal matters.