What's the difference between restricted stock and a restricted stock unit (RSU)?

Restricted stock (also called letter stock or section 1244 stock) is usually awarded to company directors and other high-level executives, whereas restricted stock units (RSUs) are typically awarded to lower-level employees.

Restricted stock tends to have more conditions and restrictions than an RSU. For example, restricted stock may be forfeited if the executive doesn't deliver expected results, whereas RSUs usually only require the employee to stay with the company for a certain period of time before the shares are vested.

Another difference is that restricted stock awardees can opt to make a Section 83(b) election upon receipt of the award. Under Section 83(b), the awardee pays ordinary income tax on the fair market value of the award, which usually gets reported in box 1 of their W-2. Without this election, the awardee would get taxed on the fair market value at some future date when the stock vests. The 83(b) election isn't available on RSUs.

Finally, restricted stock holders have voting rights during the vesting period, whereas RSU holders don't.