---
title: "What Is RSU?"
term: "RSU"
description: "An RSU (restricted stock unit) is a promise to deliver company shares upon vesting — employees earn stock over time without buying options, with tax due when shares settle."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["equity"]
source: https://venturecapitaltracker.com/glossary/rsu
---

# What Is RSU?

> An RSU (restricted stock unit) is a promise to deliver company shares upon vesting — employees earn stock over time without buying options, with tax due when shares settle.

**RSU** (restricted stock unit) is an equity grant that converts to actual shares after the recipient satisfies vesting conditions — no exercise price, but tax typically hits at settlement.

### How it works

Company grants 10,000 RSUs vesting over four years. Each vest date, shares **settle** into your brokerage account (public) or are held until liquidity (private). Taxable income equals fair market value at settlement unless a valid 83(b)-like treatment applies in rare structures — most employees owe ordinary income tax and payroll taxes when shares deliver.

Private startups may use **double-trigger** acceleration: RSUs vest on schedule, but settlement waits until IPO or acquisition to avoid tax before cash exists.

Compare to **ISO/NSO options**: options require exercise payment and different tax timing; RSUs are simpler administratively but can surprise employees with large withholding bills at public vest events.

Founders at incorporation usually get [restricted stock](/glossary/restricted-stock), not RSUs; RSUs dominate at scale when 409A FMV is established and cap table admin is centralized.

### Why it matters

- **Founders / operators:** Negotiate refresh grants, vesting cliffs, and whether company supports sell-to-cover withholding.
- **Investors:** Heavy RSU pools dilute common; refresh policies affect burn and retention in late-stage companies.

### Common mistake

Treating RSU paper value as cash. Until settlement and a liquid market (or tender), vested RSUs may be unusable for rent — especially in private companies with no secondary program.

### Related ideas

See also [RSU tax](/glossary/rsu-tax), [restricted stock](/glossary/restricted-stock), [equity incentive plan](/glossary/equity-incentive-plan), and [409A valuation](/glossary/409a-valuation).

## FAQ

### What is an RSU in simple terms?

An RSU is a grant of company stock you receive after meeting a vesting schedule — typically four years. You do not pay to exercise like an option; when RSUs vest and settle, you get shares and owe income tax on their value then.

### Why does RSU matter?

For operators, RSUs are common at public and late-stage private companies where share value is easier to estimate. For founders designing comp, RSUs simplify grants but create cash tax burden for employees at vest if no company sale or withholding plan exists.


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Source: https://venturecapitaltracker.com/glossary/rsu