Some companies will offer an early exercise provision on their NQSOs. This allows you to exercise your NQSO prior to the shares vesting.
If allowed an early exercise, the 83(b) election of non-qualified stock options allows you to exercise and pay tax on your pre-vested NQSOs. When you exercise your NQSO, you’re taxed on the spread between the strike price of the NQSO and the FMV at exercise.
An early exercise and an 83(b) election is a tax planning strategy that is often considered for pre-IPO and low cost options. Assumin the cost of the options is small and the spread between the strike price and the FMV is small, the total cost (cash to buy plus potential tax due) is palatable. By exercising and holding early and filing the 83(b) election, you can begin the holding period, and attempt to convert what might be ordinary income to long-term capital gains.