Founders hiring internationally or fully remote — trying to understand why ISOs aren't an option for hires outside the U.S., and how to structure equity for them instead.
Hiring Internationally? Here's Why ISOs Aren't an Option
Incentive Stock Options are a creation of the U.S. tax code — your remote or international hires need a different structure entirely.
See how to grant equity to international team members without guessing at the tax treatment.
Founders building distributed teams often assume "ISO vs NSO" is a choice they get to make for every hire. For anyone outside the U.S., it isn't — the choice was already made by the tax code.
Why ISOs Don't Exist Outside the U.S. Tax Code
Incentive Stock Options get their favorable treatment from a specific section of the U.S. Internal Revenue Code. That provision has no equivalent for employees who aren't U.S. taxpayers, so international hires are only eligible for NSOs, regardless of their role or seniority.
What Your Remote or International Hires Are Actually Getting
An NSO granted to an international employee is taxed under whatever equity-compensation rules apply in their country — which may look nothing like U.S. NSO treatment. Some countries tax at grant, some at vesting, some at exercise. This is where local counsel, not a U.S.-centric guide, becomes essential.
- U.S. tax rules don't travel — assume nothing about how another country taxes the same grant
- NSOs are the default structure, but local tax treatment still varies by country
- Local legal review is not optional once you have equity holders outside the U.S.
Frequently Asked Questions
Can I give a remote employee in another country an ISO?
No. ISOs only exist under U.S. tax law and require the recipient to be a U.S. taxpayer. Employees outside the U.S. can only be granted NSOs, and even then, local tax treatment in their country may differ significantly from U.S. rules.
- Confirm the employee's tax residency before drafting the grant
- NSO is the correct U.S.-side classification for all non-U.S. hires
- Local counsel should review the grant under that country's tax code
How should I structure equity for a global team?
Grant NSOs as the baseline structure for every non-U.S. hire, then get local guidance for how that country taxes it. Some founders also use restricted stock units (RSUs) internationally, since they're often simpler to administer across jurisdictions.
- Treat every new country as a separate compliance question
- RSUs are worth evaluating as an alternative for international hires
- Budget for local legal review as part of your hiring cost, not an afterthought
The Lovie Advantage
Most cap table tools are built with a U.S.-only mental model, which breaks down the moment a founder hires internationally. Internal Link: Lovie Cap Table Management tracks grant type and jurisdiction together, so your cap table doesn't quietly assume every equity holder is a U.S. taxpayer.
Hiring a domestic advisor instead of an international employee? The eligibility rule is related but different — see Internal Link: Why Advisors Only Get NSOs, Not ISOs. For general international-hiring considerations, the U.S. Small Business Administration's guide to choosing a business structure is a useful starting point.
Structure Global Equity Correctly
See how to grant equity to international team members without guessing at the tax treatment. Start Free with Lovie