Restricted Stock Units (RSUs) are a form of equity compensation that companies, particularly later stage companies, offer to service providers. RSUs represent a promise from the employer to grant shares of the company's stock to the employee on a future date, subject to certain conditions being met. These conditions are typically tied to maintaining service provider status for a certain period of time, and are referred to as “vesting conditions”. Unlike stock options, RSUs do not require employees to purchase the stock; instead, they receive the shares in full as a form of compensation.

Once the vesting conditions of an RSU grant are met, the RSUs are considered vested, and the employee receives the shares. Tax treatment of RSUs differs from stock options. When RSUs vest, the employee is typically required to pay ordinary income tax on the fair market value of the shares at that time. The company may withhold a portion of the shares or provide a sell-to-cover option to cover the tax liability. If an employee holds the shares for more than a year before selling, the employee may be subject to long-term capital gains tax on the difference between the sale price and the fair market value at vesting.

If you leave the company, you typically keep your fully vested RSU shares. However, with double-trigger RSUs, any unvested shares that are not time-based may be forfeited, and time-vested shares may expire before fully vesting if the milestone-based conditions are not met.