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.
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 are the different types of restricted stock?
Two variations on restricted stock are restricted stock units (RSUs) and restricted stock awards. A restricted stock unit is granted to an employee and represents the promise to give a certain number of shares of the company's stock at a predetermined time in the future.
