Can My Foreign Company Hire US Employees Without Setting Up a US Entity?
You have a company outside the US. You found a great engineer, salesperson, or operator based in the US. Naturally, your next question is:
“Can we just hire them directly without setting up a US company?”
The short answer: not safely.
Once you hire someone working in the US, you trigger US employment, tax, and compliance rules, even if your company is based somewhere else. But that does not necessarily mean you need to spend months and tens of thousands of dollars forming a US entity before making your first hire.
Most founders solving this problem end up choosing one of two paths.
Option 1: Set Up a US Subsidiary
This is the traditional route. You form a US LLC or C-Corp that becomes the legal employer for your US team.
A US entity allows you to:
- Run payroll properly
- Offer benefits
- Open US bank accounts
- Build a long-term US presence
This path usually makes sense if:
- You plan to scale aggressively in the US
- You expect to hire a larger US team
- Your employees will create sensitive IP
- Investors or enterprise customers expect US operations
The tradeoff is time and cost.
Setting up a US subsidiary typically takes anywhere from 4 to 12 weeks depending on the structure and state. Legal setup, registrations, payroll infrastructure, and compliance can range from roughly $5,000 to $40,000+.
For some companies, that investment is absolutely worth it. For others, especially early-stage teams, it can be premature.
Option 2: Use an Employer of Record (EOR)
This is the option many international founders do not realize exists.
An Employer of Record (EOR) is a US-based company that legally employs the worker on your behalf. The employee works for you operationally, but the EOR handles:
- Payroll
- Tax withholding
- Benefits
- State registrations
- Employment compliance
You manage the employee day-to-day. The EOR handles the legal employment infrastructure.
This allows foreign companies to hire US employees quickly without first creating a US entity.
Popular EOR providers in 2026 include:
- Deel
- Rippling
- Remote.com
- Multiplier
Most EOR platforms can onboard a US employee within days, not months.
Typical pricing ranges from approximately $500 to $1,000 per employee per month, plus the employee’s compensation.
For smaller teams, this is often the cleanest and fastest solution.
Contractor Misclassification: The Path That Gets Founders in Trouble
Some founders try to hire US workers as independent contractors to avoid the entity problem. The IRS uses a multi-factor test, and ongoing work with set hours consistently fails it. Misclassification leads to back taxes, penalties, and Department of Labor investigations.
Common Founder Mistakes
Mistake #1: Classifying US Workers as Independent Contractors to Avoid the Entity Question
If the role looks like employment under the IRS test, it will be treated as employment regardless of what the contract says. The exposure includes unpaid payroll taxes, benefits violations, and state penalties that accumulate retroactively.
Mistake #2: Assuming EOR Is Only a Temporary Fix
EOR is a fully viable long-term solution. For teams under 10 to 15 people, EOR often beats running a subsidiary indefinitely. Set up a US entity when scale, IP control, or governance demands it.
Mistake #3: Treating All US States as the Same
A US employee in California creates different obligations than one in Texas. Wage transparency, nexus rules, and benefits requirements vary by state. EOR providers handle this automatically. Foreign companies without one must register and comply in each state where a worker is located.
Quick Founders Self-Check
- Do we already have US-based contractors performing employee-like work?
- How many US hires do we realistically expect in the next 12 months?
- Will these employees create sensitive intellectual property?
- Which states will our workers be located in?
- Have our contractor agreements been legally reviewed?
If any of these questions surface uncertainty, that is the starting point for a legal conversation.
Bottom Line
Foreign companies can hire US workers legally via a US subsidiary or an Employer of Record. EOR is faster and often the right call for teams under 15 people. Paying workers informally and hoping the classification question never comes up is never the right answer.
Hiring in the US and Not Sure Which Path Makes Sense?
Schedule a free 30-minute call with our team.
Book here: https://calendly.com/primumlaw/30min
Sources Used
- EOR Quotes, “Employer of Record (EOR) in the USA: 2026 Guide” — https://eorquotes.com/employer-of-record-in-usa-guide/
- Deel, “How to Hire Using an Employer of Record in the US (2026)” — https://www.deel.com/blog/employer-of-record-us/
- BambooHR, “How to Hire International Employees Without a Legal Entity” — https://www.bamboohr.com/blog/global-hiring-without-entity