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I'm reading through Do More Faster and there is a chapter in there that talks about an 83b election and how it is ESSENTIAL that you do it when you create your startup. It seems to save you a ton of taxes later on down the road.

Has anyone had any experience with it? Is it necessary that you do it? I been talking to many business lawyers and non of them seem to know anything about it off the top of their heads.

Also, does this election effect a startup that is 100% bootstrapped and is not planning to take outside money?

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Yes, the election has to do with the tax associated with the value of your shares, and that is relevant regardless of whether you are bootstrapped or funded.

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Does it matter if I do an llc? – Edgar Miranda Oct 8 '11 at 23:45
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It's critical if your shares vest over time. Otherwise, you'd owe new income tax each time a chunk of shares becomes vested, which happens monthly. And you'd have to compute a current fair market value each time, and pay tax on the paper profit. Crazy, right? That's why you need the 83b election.

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