Startup Equity, Vesting & Option Exercise Windows
Equity can be the most valuable part of an offer or an illusion — the vesting schedule, acceleration, and exercise window decide which.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
Equity compensation — stock options or RSUs — is often the largest potential value in a startup or growth-company offer, but its real worth depends on vesting, what happens at a change of control or termination, and how long you have to exercise options after you leave.
These mechanics, plus the tax treatment, determine whether the grant becomes real money.
Topics to check
Most grants vest over four years with a one-year cliff (nothing vests until your first anniversary, then monthly or quarterly). Check whether there is acceleration: "single-trigger" (vesting accelerates on a change of control) or "double-trigger" (a change of control plus a termination without cause). Without acceleration, unvested equity can simply disappear if the company is sold or you are let go.
For senior roles, double-trigger acceleration is a common and valuable thing to negotiate.
For stock options, the post-termination exercise window is critical: many plans give you only 90 days after leaving to exercise vested options, which can force a large out-of-pocket payment (and tax bill) to avoid losing them. Some companies offer an extended window. Find this number — it can make vested options worthless if you cannot afford to exercise in time.
Confirm the strike price, the number of shares, and whether early exercise or an 83(b) election is available.
Tax depends on the instrument. For nonstatutory (nonqualified) stock options, you generally include the spread (fair market value minus exercise price) as income when you exercise; incentive stock options (ISOs) have different treatment and can trigger alternative minimum tax. RSUs are generally taxed as ordinary income when they vest and settle.
Because the tax can be significant and timing-sensitive, confirm the treatment of your specific grant with a tax advisor before exercising.
IRS — Topic no. 427, Stock optionsKey takeaways
- Most grants vest over four years with a one-year cliff.
- Acceleration (single- or double-trigger) protects unvested equity at a sale or termination.
- The post-termination exercise window (often 90 days) can make vested options unaffordable to keep.
- NSOs, ISOs, and RSUs are taxed differently and the timing matters.
- Confirm strike price, share count, acceleration, and tax treatment before signing or exercising.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Equity tax treatment depends on the instrument and timing; confirm with a tax advisor.
- Acceleration, exercise windows, and plan terms vary by company and plan document.
Frequently asked questions
What is a vesting cliff?
A cliff is an initial period — usually one year — during which no equity vests. If you leave before the cliff, you get nothing; once you pass it, a chunk vests and the rest typically vests monthly or quarterly over the remaining schedule (commonly four years total).
What is single- vs double-trigger acceleration?
Single-trigger accelerates vesting on a change of control alone; double-trigger requires a change of control plus a termination without cause. Double-trigger is more common; without any acceleration, unvested equity can be lost if the company is sold or you are let go.
Why does the option exercise window matter?
Many plans give you only ~90 days after leaving to exercise vested options. Exercising can require significant cash and trigger taxes, so a short window can effectively forfeit vested options if you cannot afford to exercise in time. Some companies offer an extended window.