How does an early exercise option work?
Some plans allow you to exercise options before they vest. You receive restricted shares that the company can repurchase at cost if you leave before vesting.
Why people do it
At an early stage the spread is near zero, so exercising creates almost no taxable income and starts the long-term capital gains and ISO holding clocks immediately.
The 83(b) requirement
Without an 83(b) election within 30 days, you are taxed as each tranche vests at the then-current value — usually the worst outcome.
The risk
You are paying real cash for shares that may never be liquid, and unvested shares can be repurchased if you leave. Only spend what you can afford to lose entirely.
This article is educational and not tax, legal, or financial advice. Talk to a CPA or tax advisor about your specific situation.