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AI Equity Agreement Review

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Guided by Grayver Law Group
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Personal (PII) & Corporate Data Redacted Before AI
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An equity agreement documents an issuance of stock, options, RSUs, or profits interests to a founder, employee, advisor, or consultant. Justee reviews equity agreements against IRC §409A (deferred comp), §83(b) elections, §422 (ISO), and the company's equity plan to flag tax, vesting, and acceleration issues.

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Key Takeaways

IRC §409A requires options to be priced at fair market value to avoid 20% penalty + interest

§83(b) elections must be filed within 30 days of grant for unvested stock or LP profits interests

ISO §422 qualification has strict $100K/year exercise limits and holding period requirements

1-2 minutes*

Average Review Time

195+ compliance points analyzed*

Compliance Checks

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Document Security

* Estimates based on typical documents. Actual results vary by document type and complexity.

Equity agreements are deceptively simple — and uniquely hostile to non-specialists. IRC §409A imposes a 20% additional tax plus interest if a stock option is granted below fair market value. Section 83(b) elections must be filed with the IRS within 30 days of grant for unvested stock; missing the deadline is irreversible and creates phantom income at vesting. ISOs under IRC §422 must comply with the $100,000 annual exercise limit, must be granted under a written plan approved by stockholders within 12 months, and must require employee status at grant and through exercise (with 3-month post-termination exercise window). Profits interests under Rev. Proc. 93-27 require specific drafting to qualify for non-recognition. The equity plan itself must be approved by stockholders within 12 months for ISO eligibility under §422 and for §162(m) historic deduction. Justee reviews equity agreements against §409A, §83(b), §422, Rev. Proc. 93-27, and the underlying plan to flag tax landmines.

How It Works

1

Upload Your Document

Upload your contract in PDF, DOCX, or TXT format

2

AI Analysis

Our AI reviews your document for compliance issues

3

Review Findings

Get detailed findings with risk ratings and legal citations

4

Take Action

Use our suggestions to improve your document

What We Check

Verifies §409A FMV pricing and exemption analysis

Confirms §83(b) election timing and content

Tests ISO §422 qualification ($100K limit, holding periods)

Validates equity plan stockholder approval

Flags vesting acceleration and clawback misalignment

Common Risks We Identify

§409A FMV not based on §409A-compliant valuation

§83(b) deadline missed — irreversible

ISO disqualified by exceeding $100K rule

Equity plan never approved by stockholders

Acceleration triggers conflict with §280G golden-parachute

Hypothetical Case Study by Justee

Justee recently analyzed an "equity agreement" granting 600,000 shares of common stock subject to 4-year vesting for a seed-stage Delaware corporation granting 6% in equity to a fractional CTO.

Issue Found: The grant was issued at $0.001/share (par value) one month after a $1.5M SAFE round closed at a $10M cap. Under §409A, the FMV at grant was almost certainly above par, creating discounted-stock exposure with 20% federal penalty plus state penalties. The grantee also had not filed an §83(b) election — and was 28 days past the 30-day deadline at the time of our review. We caught this with 2 days to spare.

Justee Recommendation: We rushed the §83(b) filing on day 30. We obtained a §409A valuation reflecting the SAFE-round value and re-priced the equivalent option grant. For the existing stock issuance, we documented the §409A short-term-deferral exemption analysis with tax counsel.

No §83(b) Reference for Unvested Stock

Problematic Language

"Recipient acknowledges that the Shares are subject to vesting and forfeiture as set forth in the Vesting Schedule."

Recommended Language

"Recipient acknowledges that the Shares are subject to vesting and forfeiture as set forth in the Vesting Schedule. Recipient further acknowledges that, unless an election under Section 83(b) of the Internal Revenue Code is filed within thirty (30) days of the date of this Agreement, Recipient will recognize ordinary income equal to the fair market value of the Shares as they vest. The Company has provided Recipient with the §83(b) election form attached as Exhibit B but is not Recipient's tax advisor. Recipient is solely responsible for the timely filing of any §83(b) election."

Why it matters: Companies should not advise on §83(b) but must surface it. The amended language places the responsibility on the recipient while ensuring they are aware of the deadline.

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"Justee is redefining the legal document compliance process across all practice areas, transforming hours of work into minutes, while reducing stress and boosting accuracy."

Artem Dolukhanyan
Artem Dolukhanyan

Partner, Corporate Transactions at Grayver Law Group

AI Review vs. Manual Review

FeatureJustee AI ReviewManual Review
Review Time2-5 minutes2-4 hours
CostFree trial available$150-500+
Legal CitationsAutomaticVaries by reviewer
Clause SuggestionsIncludedExtra fee
Availability24/7 instantBusiness hours
* Comparison data represents estimates based on industry research and internal testing for typical contract types. Review times, costs, and accuracy percentages vary by document complexity, length, jurisdiction, and specific legal requirements. See full disclaimer below.

Official Resources

IRS §409A Final Regs

IRS Section 409A guidance

IRS §83(b) Election Guide

IRS §83(b) election procedures

IRS §422 Incentive Stock Options

26 U.S.C. §422 ISO requirements

Related Document Reviews

Stock Option Agreement ReviewFounder Stock Purchase AgreementRSU Agreement ReviewAdvisor Agreement Review
Important Legal Disclaimer

Not Legal Advice: The information and analysis provided by Justee AI is for general informational purposes only and does not constitute legal advice. While we strive to provide accurate and helpful information, our AI-powered service is not a substitute for professional legal counsel.

No Attorney-Client Relationship: Use of Justee AI does not create an attorney-client relationship. Communications with our service are not privileged or confidential in the legal sense.

Consult a Professional: For specific legal matters, we strongly recommend consulting with a qualified attorney licensed in your jurisdiction. Legal requirements vary by location and circumstances, and only a licensed attorney can provide advice tailored to your specific situation.

Performance Estimates (*): All statistics, metrics, and numerical claims on this page — including review times, cost comparisons, accuracy percentages, and database size — are estimates based on internal testing, industry research, and typical use cases. Actual results vary based on document type, complexity, length, jurisdiction, and other factors. Cost comparisons reference publicly available average attorney rates and are not guaranteed savings. "1M+ laws and regulations" refers to the breadth of Justee's reference database and does not imply that every provision is checked against every law for every document.

By using our service, you acknowledge that you have read and agree to our Terms of Use and understand the limitations of AI-powered legal analysis. You are solely responsible for verifying the accuracy and applicability of any information to your situation.

Equity Agreement Review FAQ

For options on common stock of a private company, yes — at least annually and after material events. Justee flags grants without referenced valuations and recommends one before issuance.

Within 30 days of grant for unvested stock or LP profits interests. The deadline is jurisdictional — late filings are not honored. Justee flags missed deadlines.

Only if granted under a stockholder-approved plan, to an employee, with FMV strike, vested ≤$100K/year by FMV, and held 2 years from grant + 1 year from exercise. Justee tests each requirement.

LLC profits interests under Rev. Proc. 93-27 are tax-free if drafted correctly. Justee verifies the safe-harbor conditions and flags non-conforming structures.

No. Justee accelerates first-pass diligence. Tax-sensitive issues should always involve equity or tax counsel.

Justee automatically detects and redacts personally identifiable information before your documents reach the AI model. Protected types include:

Personal data:
  • Names, email addresses, and phone numbers
  • Social Security numbers and tax identifiers (ITIN)
  • Physical addresses and dates of birth
  • Credit card and bank account numbers
  • Driver's license and passport numbers
  • Medical provider identifiers (NPI) and case numbers
Corporate and business data:
  • Company and organization names
  • Business addresses and geographic locations
  • SWIFT/BIC codes, IBAN numbers, and bank routing numbers
  • Business license numbers and attorney bar IDs
  • Corporate tax identifiers (EIN)
Our system achieves 100% detection of standard PII types and approximately 97% overall coverage. Certain rare identifiers — such as cryptocurrency wallet addresses and MAC addresses — may not be detected automatically. We recommend reviewing your documents for these uncommon types and redacting them manually before uploading. See our Privacy Policy and Terms of Use for details and limitations.

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Last updated: May 13, 2026

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