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What is a restricted stock unit?
A restricted stock unit (RSU) is a type of compensation issued by an employer to an employee in the form of company shares. The company uses a vesting plan with a distribution schedule to issue restricted stock units to employees after they achieve their performance milestones or after remaining with their employer for a particular time. RSUs give employees interest in company stock but with no actual value until vesting is complete.
RSUs are assigned a fair market value (FMV) once they vest. RSUs are counted as income once vested, and the employer commonly withholds a portion of the shares to pay income taxes. The employee receives the remaining shares and can then sell their shares if desired.
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