Ask HN: Advice on issuing equity to overseas team members

#1

Post by karanjassar » Sun, Aug 24, 2014, 3:32 PM UTC

5 out 7 team members in our company are abroad. We'd like to issue them equity but they can't file 409a election as they don't have a US SSN or Tax ID. We are registered in Delaware.

As per my lawyer, who's not a tax expert, they face a problem only if at the time of liquidation they are in the US. They will be taxed as if they never filed the 409a Election with the equity grant.

There a real possibility that some of our team members will move to the US and face this issue.

Has anyone dealt with this issue? Any advise on handling this would be extremely helpful.

Re: Ask HN: Advice on issuing equity to overseas team members

#2

Post by walshemj » Sun, Aug 24, 2014, 3:58 PM UTC

Cannot you get a tax id as a non resident alien? I know that if you hold USA shares outside the USA you can get a tax Id by filling in the w-8 ben forms (to avoid double taxation on dividends)

Re: Ask HN: Advice on issuing equity to overseas team members

#3

Post by patio11 » Sun, Aug 24, 2014, 4:08 PM UTC

Get them Individual Taxpayer Identification Numbers, which will take about six weeks. The form you want is a W-7.

You can probably file the 409a elections and fill in the SSN of "non-resident alien; W-7 pending" if that is time-sensitive.

Re: Ask HN: Advice on issuing equity to overseas team members

#4

Post by ares2012 » Sun, Aug 24, 2014, 5:33 PM UTC

I think you mean an 83b election, which is what applies to income tax treatments for vesting schedules. You should be issuing everyone on your team stock options which do not require an 83b election. You can't issue incentive stock options (ISOs) to non-US citizens but you can issue them non-qualified options (NSOs).

83b elections only become a problem for people where you grant them actual shares which they vest in over time which is only common for founders.

Note that a 409a valuation helps you figure out the strike price to set for those options but can be expensive. Most very early stage companies will have the board set the strike price until the company has gotten far enough to justify a 409a valuation.

Re: Ask HN: Advice on issuing equity to overseas team members

#5

Post by gamblor956 » Sun, Aug 24, 2014, 5:39 PM UTC

walshemj wrote: post #2

Cannot you get a tax id as a non resident alien? I know that if you hold USA shares outside the USA you can get a tax Id by filling in the w-8 ben forms (to avoid double taxation on dividends)

Wrong form.

The W-8BEN is the form used to established beneficial ownership of a foreign-destined payment. It can also be used by individuals to claim treaty benefits (such as avoiding double taxation). An SSN, ITIN, or foreign equivalent is required to be provided on the form.

Re: Ask HN: Advice on issuing equity to overseas team members

#6

Post by mjmahone17 » Sun, Aug 24, 2014, 6:08 PM UTC

ares2012 wrote: post #4

I think you mean an 83b election, which is what applies to income tax treatments for vesting schedules. You should be issuing everyone on your team stock options which do not require an 83b election. You can't issue incentive stock options (ISOs) to non-US citizens but you can issue them non-qualified options (NSOs). 83b elections only become a problem for people where you grant them actual shares which they vest in…

> 83b elections only become a problem for people where you grant them actual shares which they vest in over time which is only common for founders.

This has been common amongst companies like Google and Facebook, even pre-IPO. Don't most startups provide RSUs and similar? Options seem like a weird incentive, mostly because I have to have capital to pay for them before I receive them.

Re: Ask HN: Advice on issuing equity to overseas team members

#7

Post by walshemj » Sun, Aug 24, 2014, 6:14 PM UTC

gamblor956 wrote: post #5

walshemj wrote: post #2

Cannot you get a tax id as a non resident alien? I know that if you hold USA shares outside the USA you can get a tax Id by filling in the w-8 ben forms (to avoid double taxation on dividends)

Wrong form. The W-8BEN is the form used to established beneficial ownership of a foreign-destined payment. It can also be used by individuals to claim treaty benefits (such as avoiding double taxation). An SSN, ITIN, or foreign equivalent is required to be provided on the form.

Isn't that what the OP wants I looked at filing a W-8BEN and I don't have a USA SSN

Re: Ask HN: Advice on issuing equity to overseas team members

#8

Post by lukasm » Sun, Aug 24, 2014, 6:18 PM UTC

I wrote a tutorial how to get ITIN if you are not US citizen

https://coderwall.com/p/nmrosg

Re: Ask HN: Advice on issuing equity to overseas team members

#9

Post by neil_s » Sun, Aug 24, 2014, 6:18 PM UTC

walshemj wrote: post #2

Cannot you get a tax id as a non resident alien? I know that if you hold USA shares outside the USA you can get a tax Id by filling in the w-8 ben forms (to avoid double taxation on dividends)

You can get an SSN as a non resident alien. I did, when I working there for a summer on a J1 visa.

Re: Ask HN: Advice on issuing equity to overseas team members

#10

Post by karanjassar » Mon, Aug 25, 2014, 1:43 AM UTC

patio11 wrote: post #3

Get them Individual Taxpayer Identification Numbers, which will take about six weeks. The form you want is a W-7. You can probably file the 409a elections and fill in the SSN of "non-resident alien; W-7 pending" if that is time-sensitive.

Sorry I mixed up 409a with 83b. I meant 83b.

At one point, anyone on visas other than business/visitor could file for SSN or a Tax ID. That's no longer possible unless: 1) You are in the US on a legitimate Visa that allows you to work & 2) You have an offer letter for paid employment.

Now students on F1 visa (who are allowed to work part time on campus) can't get SSN unless they pick up a job and have a letter to prove it. Earlier they could.