The Open Guide to Equity Compensation: ISOs, RSUs, 83(b) Elections, and the AMT Trap

What the Open Guide to Equity Compensation covers and who it is for

Equity compensation is the practice of granting partial ownership in a company in exchange for work, and the ways it can be structured are confusing in proportion to the money at stake. The guide opens by framing the audience precisely: employees and job candidates who have heard terms like ISO, RSU, 83(b) election, 409A valuation, AMT, or early exercise and need to understand what those terms actually mean before making a decision. It also addresses founders who structure equity grants, advisors who receive equity for non-employment contributions, and hiring managers who negotiate compensation packages.

The scope is US private C corporations. The guide covers most employees and advisors at startups through larger private companies, with limited coverage of equity at public companies. It does not address equity compensation outside the United States, equity programs in LLCs or S corporations (where the mechanics work differently), Employee Stock Purchase Plans at public companies, or the full details of executive equity compensation programs. The guide itself recommends consulting other resources and professional advisors for those situations.

The core value is consolidation. The README notes that information about equity compensation is scattered across blogs and articles focused on single components, such as vesting, option types, or grant levels, and the guide exists to give a single reference that spans the entire lifecycle from offer to exit.

The equity types the guide documents: restricted stock, stock options, and RSUs

The guide covers three primary forms of equity compensation granted to employees at US private companies. Restricted stock grants actual shares subject to a vesting schedule; the recipient owns the stock but the company can buy it back if employment ends before vesting. Stock options give the right to purchase shares at a fixed strike price at some future time. Restricted stock units, or RSUs, represent a promise to deliver shares once vesting conditions are met, without requiring the employee to pay an exercise price upfront.

Within stock options, the guide distinguishes incentive stock options (ISOs) from non-qualified stock options (NQOs or NSOs). ISOs have specific tax treatment that can trigger the alternative minimum tax, as explained in the section the README describes as the AMT trap. Non-qualified options are taxed as ordinary income on exercise. The distinction matters enormously when an employee is deciding whether to exercise early, how many options to exercise in a given year, or what to do when leaving a company.

The 409A valuation sets the fair market value of common stock for private companies. This number determines the strike price for new option grants and has tax implications for employees who exercise. The guide also covers the 83(b) election, which allows employees who receive restricted stock or early-exercised options to pay taxes on the grant date value rather than the vesting date value, a choice with significant consequences when the stock later appreciates. These four topics (409A, strike price, ISOs vs. NQOs, 83(b)) are areas where small misunderstandings produce large financial losses.

The AMT trap and other tax pitfalls for option holders

The README names the AMT trap as a specific risk that has affected employees at otherwise successful companies. The alternative minimum tax applies separately from regular income tax, and ISO exercises can trigger AMT even when the employee has received no cash. An employee who exercises ISOs when the spread between strike price and fair market value is large may owe substantial AMT without having sold any shares or received any proceeds. If the company's stock later declines or becomes worthless, the AMT already paid cannot be fully recouped.

The guide dedicates a section to this mechanism because the consequences can be catastrophic, as the README puts it, even for employees at well-performing companies. A common failure scenario: an employee at a rapidly-growing private company exercises a large ISO grant in a high-spread year, triggers AMT, and then either the company's value declines before an IPO or the employee cannot sell shares to cover the tax bill. The guide's explicit goal here is to ensure that anyone facing this decision understands the calculation before acting, not after.

Beyond the AMT trap, the guide covers tax consequences of various exercise scenarios, what happens to options during acquisition, merger, shutdown, or IPO events, and what questions to ask a company before accepting an offer. The README describes the guide as at least a three-hour read with links to three hundred sources, which signals that the treatment is thorough rather than introductory.

Where to read the guide and how the repository is organized

The canonical version of the guide is published on Holloway at www.holloway.com/g/equity-compensation/about. The Holloway version supports search, bookmarks, highlights, expert commentary, and PDF or EPUB download. The GitHub repository at jlevy/og-equity-compensation exists as the open-source origin of the work, and the README redirects readers to Holloway for the full interactive experience.

The repository itself contains the README, a CONTRIBUTING.md file, and an images directory. The Markdown source of the guide is not present as a separate file in the repository tree; the guide lives on Holloway, with the repository serving as a public record of its origins and a place to submit contributions and report issues. Anyone who finds errors or wants to suggest improvements can do so through GitHub.

The README describes the guide as practical (with concrete suggestions and pitfalls to avoid), thoughtful (with context and multiple expert perspectives, including divergent opinion on controversial topics), and concise. The conciseness caveat is significant: the guide is dense. Someone looking for a single quick answer to one question will likely find it faster on Holloway's search than by reading through the full document.

Where the guide falls short: offer negotiations outside the US and executive compensation

The guide's declared boundaries are firm. It does not cover equity compensation outside the United States, which means employees at foreign subsidiaries of US companies, or at non-US companies that issue equity to US employees, will need different resources. The tax treatment of equity in other countries, including the UK's EMI schemes, France's BSPCE, or Germany's virtual stock plans, is outside scope.

It also does not cover compensation in LLCs or S corporations. The README notes explicitly that equity compensation in LLCs and S corporations is approached and practiced in very different ways from C corporations, and the guide does not address those structures. A technical co-founder at an LLC who receives a profits interest is in different territory than this guide covers.

Executive equity compensation gets limited treatment. Founders and early employees who hold substantial stakes and negotiate directly with investors will find useful context here, but the specific mechanics of co-founder vesting, clawback provisions in executive agreements, or Section 280G excise taxes on golden parachutes are not the guide's primary focus. The README acknowledges these gaps and invites contributions.

This guide versus professional legal and tax advice

The traditional path to understanding equity compensation is to consult an employment attorney or a tax professional who specializes in startup compensation. That approach provides personalized analysis of a specific situation but requires the client to already know which questions to ask, costs money for each consultation, and rarely produces the kind of comprehensive survey that this guide provides for free.

The guide does not replace professional advice for significant decisions. The README is explicit that decisions related to negotiating an offer and exercising stock options can have major financial consequences, and it recommends seeking professional advice for individual situations. What the guide provides is the conceptual foundation to make those consultations productive: a reader who has worked through the guide will know the difference between an ISO and an NSO, understand why 409A valuation matters, and know what questions to ask about vesting acceleration and option exercise windows.

A point the guide makes directly: understanding the technicalities of equity compensation does not guarantee good outcomes, but a thorough overview helps make better decisions and avoid some common and costly mistakes. The guide is calibrated to bring a non-expert reader to the level where they can engage usefully with a professional, not to make professional advice unnecessary.

Maintenance and availability

The repository's last push was on 2026-06-02, and the project is not archived. The guide is published in a second edition on Holloway, expanded from the original edition that circulated on GitHub and received discussion on Hacker News.

The license for the repository is not stated in the repository metadata, which is a material gap for anyone who wants to reproduce or adapt the guide. The Holloway publication has its own terms. The CONTRIBUTING.md file in the repository explains how to suggest improvements, and the README invites contributions with a credit policy for accepted improvements.

The guide is positioned as a reference that is always in process. The README states that features to enable community suggestions, new sections, and revisions are being tested on Holloway, which means the authoritative version may continue to evolve beyond what the repository reflects at any moment.

Editorial conclusion

Employees at US private C corporations who need to understand an equity offer, exercise stock options, or file an 83(b) election will get more from this guide than from any single blog post. Founders and advisors who grant equity will find the same dual perspective useful. The guide does not cover equity outside the US, in LLCs or S corporations, or the full details of executive compensation programs. Read it on Holloway at www.holloway.com/g/equity-compensation/about before talking to a tax professional, not as a substitute for that conversation.

Frequently asked questions

Official sources

1. Issues
2. jlevy/og-equity-compensation on GitHub
3. README