{"id":452,"date":"2026-09-04T14:08:42","date_gmt":"2026-09-04T14:08:42","guid":{"rendered":"https:\/\/talently.tech\/en\/blog\/equity-for-latam-hires\/"},"modified":"2026-09-04T14:09:24","modified_gmt":"2026-09-04T14:09:24","slug":"equity-for-latam-hires","status":"publish","type":"post","link":"https:\/\/talently.tech\/en\/blog\/equity-for-latam-hires\/","title":{"rendered":"Equity for LATAM Hires: Instruments, Exercise and Disclosure"},"content":{"rendered":"Reading Time: <\/span> 6<\/span> minutes<\/span><\/span>\n

A US startup offers a senior backend engineer in Medell\u00edn 0.15% of the company, and the engineer counters asking for $1,000 more per month instead. That answer is usually rational. The instrument, the exercise mechanics, and how much of the cap table you show decide whether a grant means anything to someone who is not a US employee.<\/p>\n\n\n\n

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TL;DR<\/h2>\n
  • ISOs are not available to your LATAM hires.<\/strong> They require employment with the US company or a subsidiary, and the tax benefit only exists for US taxpayers.<\/li>
  • NSOs are the default for contractors.<\/strong> RSUs fit once you have a local entity and a high 409A. Phantom equity or SARs fit when the cap table cannot take more holders.<\/li>
  • Exercise is where grants die.<\/strong> A dollar strike paid out of pocket, a 90-day post-termination window, and local tax on the spread kill more grants than vesting schedules do.<\/li>
  • Disclosure moves the needle more than grant size.<\/strong> Fully diluted share count, current 409A, preference stack, and last round price change how a candidate values an offer.<\/li>
  • Price the tradeoff in cash.<\/strong> Give an explicit A\/B choice with the exchange rate in dollars, and never headline a projected exit value.<\/li>
  • This is not legal or tax advice.<\/strong> Validate every grant with counsel in the individual’s jurisdiction.<\/li><\/ul>\n<\/div>\n\n\n

    Why ISOs Do Not Apply and What Replaces Them<\/h2>\n\n\n

    Incentive stock options under Section 422 can only go to employees of the granting company or its parent or subsidiary. An independent contractor in Bogot\u00e1 is not an employee of anything you own, so the grant fails the statute. Even where you have a Mexican or Colombian entity and the person is formally employed by it, the ISO benefit is a US one: favorable treatment on a qualifying disposition, AMT instead of ordinary income at exercise. Someone who files only in Colombia gets none of it.<\/p>\n\n\n\n

    Instrument<\/th>Fits when<\/th>Main catch<\/th><\/tr><\/thead>
    NSOs<\/strong><\/td>Contractors and non-US employees, any stage<\/td>Taxable spread at exercise, strike paid in USD out of pocket<\/td><\/tr>
    RSUs<\/strong><\/td>You have a local entity and payroll path, and a 409A high enough that options feel thin<\/td>Tax at vest unless double-trigger, needs withholding machinery<\/td><\/tr>
    Phantom equity \/ SARs<\/strong><\/td>Cap table cannot absorb more holders, or local rules make real shares painful<\/td>Cash settlement from company funds, ordinary income, no capital gains treatment<\/td><\/tr>
    Restricted stock<\/strong><\/td>Very early, 409A near zero<\/td>30-day 83(b) window, foreign holders on the cap table, local securities compliance<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    Most companies hiring 5 to 40 engineers in the region land on NSOs from the US parent, with a phantom plan as the fallback where counsel says direct issuance costs more than it returns.<\/p>\n\n\n

    The Contractor Model Changes Vesting and 83(b)<\/h2>\n\n\n

    Vesting lives in the grant agreement, not the services contract, and the two need to reference each other. Define continuous service<\/strong> so contractor service counts. Otherwise vesting can look like it stopped the day the person moved from a contractor arrangement to employment with your local entity, or the reverse. Termination of the services agreement starts the exercise clock, so check that notice periods and the option clock use the same date.<\/p>\n\n\n\n

    The 83(b) election applies to restricted stock and early-exercised options and must reach the IRS within 30 days of transfer. Someone with no SSN needs an ITIN, which means a W-7 filing and a wait. Be straight about what it buys them: for a person who will never be a US taxpayer, it is mostly protective in case they later move to the US. Their real bill is set by Colombian, Mexican, or Brazilian rules. Collect a W-8BEN<\/strong> at grant, not at exercise.<\/p>\n\n\n

    Exercise Is the Part Nobody Plans For<\/h2>\n\n\n

    Run the arithmetic a candidate runs. A grant of 20,000 options at a $1.80 strike costs $36,000 to exercise in full. For an engineer earning $75,000 in Buenos Aires that is not a rounding error, and it comes before tax on the spread. If the 409A has moved to $6.00 by exercise, the $84,000 spread is ordinary income in their country in most cases, due that year, with no shares sold to cover it.<\/p>\n\n\n\n

    Four things are worth the legal spend:<\/p>\n\n\n\n

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    • Extend the post-termination exercise period.<\/strong> Ninety days assumes the holder can raise five figures in three months. Windows of 5 to 10 years are common now, and the usual objection (it converts ISOs to NSOs) does not apply here.<\/li>\n\n\n\n
    • Allow net or cashless exercise at a liquidity event.<\/strong> That removes the out-of-pocket problem for the case that actually pays out.<\/li>\n\n\n\n
    • Confirm money can move both directions.<\/strong> Argentina’s currency controls have made paying a USD strike and receiving proceeds complicated at various points.<\/li>\n\n\n\n
    • Settle who withholds.<\/strong> A contractor with no payroll relationship to you often has no withholding mechanism at all, so the individual owes and files the tax alone. Put that in writing at grant time.<\/li>\n<\/ul>\n\n\n

      Why Candidates Discount Equity to Near Zero<\/h2>\n\n\n

      Engineers in the region have watched grants expire worthless, seen acquisitions clear the preference stack and nothing more, and heard the same advice from every peer: treat equity as a bonus and negotiate on cash. A grant of “15,000 options” with no denominator is not information.<\/p>\n\n\n\n

      Disclosure changes that. Put in the offer document:<\/p>\n\n\n\n

        \n
      • Fully diluted shares outstanding<\/strong>, so 15,000 becomes a percentage<\/li>\n\n\n\n
      • Current 409A price per share<\/strong> and the valuation date<\/li>\n\n\n\n
      • Strike price<\/strong>, vesting, and cliff<\/li>\n\n\n\n
      • Total liquidation preference<\/strong> in dollars, and whether it is participating<\/li>\n\n\n\n
      • Last round price per share and date<\/strong><\/li>\n<\/ul>\n\n\n\n

        Then the candidate can compute that 15,000 of 90 million fully diluted is 0.017%, that a $300M exit against $70M of preferences leaves roughly $39 per basis point, and decide. Some still take the cash. The ones who take equity took it with open eyes, which is the only version that survives a down round without a retention problem.<\/p>\n\n\n

        Structuring the Offer When the Candidate Wants Cash<\/h2>\n\n\n

        Put the tradeoff on the table as a choice, priced in numbers:<\/p>\n\n\n\n

        \n

        Option A: $92,000 per year plus 18,000 options at a $1.80 strike.
        Option B: $102,000 per year plus 6,000 options at a $1.80 strike.<\/p>\n<\/blockquote>\n\n\n\n

        That tells the candidate you price 12,000 options at $10,000 a year and lets them weigh their own risk tolerance.<\/p>\n\n\n\n

        Two rules. Do not quote a projected exit value or multiply options by a hoped-for share price. And do not headline the grant as “worth $X at today’s valuation,” because the 409A is not a market price and preferences sit ahead of common. Overselling to someone who reads the terms at month 14 is how you lose the engineer.<\/p>\n\n\n