Stock options for overseas contractors


Our company is a US based software start-up. We have 3-4 contractors in India (Indian citizens, never worked in US) and we pay them directly. We are considering issuing stock options to them. I would like to know if there are legal and tax implication on issuing stock options to them?

Foreign Stock Options Overseas

asked Jul 23 '13 at 03:38
6 points

1 Answer


I would like to know if there legal and tax implication on issuing
stock options to them?

Legal: it may affect your corporate structure. For example, non-US people can only be shareholders of a C -Corp, so if you're counting on an S-Corp preferential treatment - forget it.

Tax: depending on the Indo-US treaty and Indian law, this is probably going to be a taxable event for them and they'll have to pay income taxes on the value of the options received, either now or when exercised.

If your startup is a disregarded entity (e.g.: LLC) then there may be some more issues.

Talk to a tax adviser experienced in Indo-US tax issues. You should also ask an attorney about the potential legal issues. I'm neither a tax adviser nor an attorney.

answered Jul 23 '13 at 04:02
5,090 points

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