Many Israeli startups have the same structure: a Delaware parent company and an Israeli subsidiary that employs the team. Once the company raises money, the founders start paying themselves, and a practical question comes up: which company should pay the founder, and how much?
The Short Answer
Pay the founder from the entity in the country where they live and work. A founder living in Israel is normally an employee of the Israeli subsidiary. A founder who relocates to the US normally moves to US payroll. The amount should cover living costs without shortening runway, and it is usually below market rate until later rounds. For current ranges, see our startup CEO salary guide for 2026.
Why "Where" Matters More Than "How Much"
- Tax residency. An Israeli resident is taxed in Israel on worldwide income. Being paid by the US parent does not change that, and it can add US reporting.
- Social security. Salary paid from the wrong entity can trigger contributions in both countries. The Israel–US totalization agreement helps, but only when applied correctly.
- Transfer pricing. The Israeli subsidiary usually bills the parent on a cost-plus basis. Founder salaries are part of that cost base, so where they sit affects taxable profit in each country. See transfer pricing for Israeli startups.
Israel vs. US Payroll at a Glance
| Topic | Israeli subsidiary payroll | US parent payroll |
|---|---|---|
| Typical founder | Lives and works in Israel | Relocated to the US |
| Employer add-ons | Pension, severance, study fund, Bituach Leumi | FICA, state taxes, health insurance |
| Main risk | Weak documentation of the cost-plus agreement | Israeli residency not properly ended |
| Related guide | Paying yourself: salary, dividend or draw | US payroll for Israeli startups |
Common Mistakes
- Paying an Israel-based founder through US payroll "because the investors are American."
- Moving to the US without planning when Israeli residency ends. See our nituk toshavut guide.
- Setting a salary without board approval, which investors expect to see documented.
- Forgetting that equity and salary interact. See the equity compensation guide.
A Simple Decision Path
- Where does the founder live and work day-to-day? Start with that entity.
- Is a relocation planned in the next 12 months? Plan the payroll change with it.
- What salary does the board approve, and how does it compare to runway?
- Is the cost-plus agreement between the companies up to date?
Frequently Asked Questions
Should an Israeli founder be paid from the Israeli or the US company?+
Generally from the entity in the country where the founder lives and works. A founder living in Israel is usually employed by the Israeli subsidiary. A founder who relocates to the US usually moves to US payroll. Paying from the wrong entity can create tax and social security exposure in both countries.
How much should a founder pay themselves after a seed round?+
Most investors expect a salary that covers living costs without eating into runway, usually below market rate for the same role. See our startup CEO salary guide for current ranges.
Does a founder who moves to the US keep paying Bituach Leumi?+
The Israel–US totalization agreement is designed to prevent paying social security in both countries for the same work. Which system applies depends on the assignment length and residency, so it should be checked before the move.
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