You have found the right candidate in the USA and they are even ready to start. But your company has no US entity, no Employer Identification Number (EIN), no state registration, and setting one up could take months and cost tens of thousands of dollars. So, what will you do?
Fortunately, there is another option. Companies expanding internationally can either establish a US legal entity or partner with an Employer of Record (EOR) to hire legally without incorporation.
Our guide explains how you can hire international employees, how you can hire overseas employees, what legal requirements you have to follow, and when an EOR is the smarter business decision.
Why Hiring in the USA is More Complex Than It Looks
The United States doesn't have one unified employment law. Instead, employers must comply with federal laws while also following state and, in some cases, city specific regulations.
Federal requirements include the Fair Labor Standards Act (FLSA), Federal Insurance Contributions Act (FICA), Affordable Care Act (ACA), Title VII of the Civil Rights Act, and mandatory Form I-9 employment verification. Other than that, every state has its own payroll tax rules, minimum wage requirements, leave laws, workers' compensation obligations, and unemployment insurance programs.
According to the US Small Business Administration, businesses operate under more than 180 federal regulations, with additional state level requirements layered on top.
It becomes even more challenging when you are hiring across multiple states in the USA. Employment laws are applied where your employee is performing the work duties, not where your company is headquartered. So if you are hiring overseas employees into USA or even hiring an employee in Los Angeles while your branch is in New York, it can have complicated compliance issues.
Your 3 Options for Hiring US Employees
You have the following three (3) options for hiring your employees in USA:
- setting up your own legal entity in the USA
- working with an employer of record (EOR)
- hiring independent contractors
Set Up a US Legal Entity
If your business is planning substantial and prominent USA operations, you should create an LLC, C Corporation, or a branch office which gives you complete control over employment responsibilities.
You will need a federal EIN, state payroll registrations, workers' compensation coverage, and manage ongoing tax compliance on your own. Entity formation takes between 3 and 9 months and the legal, accounting, and registration costs can range from $20,000 to well over $100,000 depending on your structure and expansion plans.
Use an Employer of Record
If your company is hiring between one and twenty employees, testing the US market, or building distributed teams, you should consider working with an employer of record (EOR).
Your EOR handles payroll, tax filings, employment contracts, benefits, compliance, and state registrations, so your business can hire within days.
For further reading, check out our guide on what is an EOR.
Hire Independent Contractors
Hiring contractors is fast and inexpensive upfront but it's only appropriate for genuinely independent and project based work.
Misclassifying employees as contractors will cause serious consequences, including IRS investigations, Department of Labor enforcement actions, unpaid taxes, overtime claims, and financial penalties.
How to Hire Employees in the USA Without Setting Up a Company
An EOR becomes the legal employer of record for USA workers, handling employment documentation and payroll while the client company directs day-to-day work.
Your EOR manages employment contracts according to the employee's state, calculates and withholds federal and state income taxes, handles FICA and FUTA contributions, administers benefits, and maintains employment law compliance under US federal and state requirements on your behalf.
This is how the EOR process works step by step for companies with no U.S. entity:
- You identify and select the preferred candidate
- EOR issues a compliant employment contract specific to the employee's state
- EOR completes I-9 verification and new hire reporting
- EOR sets up payroll, tax withholdings (federal + state), and benefits enrollment
- Employee starts, and you manage their work, EOR manages their employment
- EOR handles ongoing payroll, quarterly tax filings, ACA reporting, and offboarding
For further reading, also check out our guide ‘What is EOR payroll service’ where we have all the employer of record payroll services explained in detail.
The Legal Requirements You Still Own
Your EOR manages payroll taxes, employment contracts, I-9 verification, workers' compensation, employee benefits, and state compliance updates. Meanwhile, your company continues to be responsible for recruiting candidates, making hiring decisions, assigning work, evaluating performance, protecting intellectual property through contracts and NDAs, and making certain that the job responsibilities reflect genuine employment.
| What the EOR handles | What you still own |
|---|---|
| Payroll tax registration and remittance in each state | Candidate selection and hiring decisions |
| Employment contracts and I-9 verification | Day-to-day management of the employee's work |
| Benefits administration (health insurance, 401k, workers' comp) | IP agreements, NDAs, and internal company policies |
| Multi-state compliance and regulatory updates | Role definition; the employee's duties must clearly define an employer-employee relationship |
Moreover, you are also responsible for accurately classifying your workers. Employers found to have incorrectly classified workers owe unpaid wages, overtime, employment taxes, interest, and government penalties.
You can also check out our guide on whether foreign companies can legally hire US employees without establishing a local entity.
Multi-State Hiring: What Happens When Your Team is Spread Across States
A lot of companies underestimate how difficult it becomes to learn how to hire out of state employees across the United States.
Employment laws follow the employee's work location. So if you hire directly, each additional state generally requires payroll tax registrations, unemployment insurance accounts, workers' compensation coverage, and compliance with local wage and leave laws. States including California, New York, New Jersey, and Massachusetts impose particularly strict employment requirements.
Your EOR simplifies multi-state hiring for you as it already operates across all fifty states. The EOR applies the appropriate state regulations without requiring your business to register separately.
The Contractor Trap: Why 1099 Isn't a Shortcut
Companies hiring remote foreign employees into the US sometimes end up classifying these workers as independent contractors by default, so they can skip the entity and EOR route. But that’s risky and we discuss why.
Further Reading: How to hire remote foreign employees
The misclassification of employees as independent contractors denies workers minimum wage, overtime pay, and other protections.
USA’s Department of Labour (DOL) applies a 6-factor economic reality test. Whereas, California uses the stricter ABC test. California, New Jersey, Massachusetts, and Illinois apply the more employee-friendly ABC test, which requires employers to prove that the worker is free from the hiring entity's control and direction, the work is outside the hiring entity's usual course of business, and the worker is customarily engaged in an independently established trade, occupation, or business. So if the role looks and functions like a job, it should be classified as employment.
EOR vs Setting Up a US Entity
With an EOR, you can hire within days. It requires only a monthly service fee, and works particularly well for businesses with fewer than 20 employees.
On the other hand, a US entity offers you complete control over employment policies and visa sponsorship capabilities. But it requires months of preparation and significantly higher upfront investment.
Here’s a look at the estimated total cost of using an employer of record:
| Factor | EOR | US Entity |
|---|---|---|
| Time to hire | Days | 3 to 9 months |
| Upfront cost | Monthly per-employee fee | $20K to $100K+ setup |
| Multi-state hiring | Handled by EOR | Register in each state separately |
| Long-term cost efficiency | Better for <20 employees | Better for large, permanent teams |
| Control over employment policies | Shared with EOR | Full control |
| Visa sponsorship | Limited | Full capability |
When EOR is clearly the right call:
- You are testing the USA market
- You are only hiring between 1 to 15 employees in multiple states
- You need the hire onboarded in days
- You want to avoid the ongoing entity maintenance
When entity setup becomes worth it:
- You are planning 50+ employees long-term
- You need to directly sponsor work visas (H-1B, green cards)
- You want full control over HR policies, benefits design, and employment terms
Hiring International Employees Into US Roles
There are two (2) different scenarios businesses often confuse:
- The first involves hiring someone already living and working in the United States. An EOR can employ that individual without requiring your company to establish a US entity.
- The second involves hiring someone outside the United States who needs relocation and work authorization. In such cases, direct sponsorship for visas such as H-1B requires a US legal entity.
If your employee remains in their home country while supporting US operations remotely, a remote employer of record manages employment in that employee's local jurisdiction instead.
What Onboarding Looks Like With an EOR
Once your candidate signs the offer, onboarding usually moves quickly. Your EOR prepares a compliant employment agreement, completes Form I-9 verification, conducts background screening where appropriate, enrolls the employee in benefits, establishes payroll tax withholding, files state new hire reports, and schedules the first payroll on your behalf.
Meanwhile, your business prepares laptops, software access, training, and internal introductions.
For most companies, remote hiring in the USA through an experienced EOR takes between 3 and 7 business days from signed offer to Day One.
Startup Expansion Into the USA
For startups, the EOR model is almost always the right first step in the following scenarios:
- No upfront entity costs consuming the other resources
- Immediate access to US talent market
- Ability to test if the US is the right market before committing structurally
If you are raising US venture capital, your investors might eventually require you to incorporate a Delaware C-Corp but that doesn't block you from using an EOR in the meantime. EOR gives you the evidence of US traction (revenue, team, customers) before you structure the entity. As your business builds customers, revenue, and traction, you can later decide if establishing a Delaware corporation is more financially effective.
How You Can Choose the Right EOR
Employer of Record services in USA should include comprehensive payroll management, state specific compliance expertise, benefits administration, and employment support throughout the employee lifecycle.
We have a checklist here to help you evaluate if the potential EOR service provider fulfills these following criteria:
- All-50-state coverage: Confirm the EOR is registered and operational in every state, not only major ones
- Benefits quality: USA employees expect competitive health insurance, 401(k), dental/vision, so assess the EOR's group plan rates
- Compliance depth: Does the EOR track state-level law changes in real time? (California, New York, and Illinois update frequently)
- Visa support: If there's any possibility of future visa sponsorship needs, check EOR's capabilities now
- Contract clarity: The EOR's termination process, indemnification scope, and fee structure are outlined clearly in the contract
- Pricing model: Most EORs charge per employee per month, so compare flat fee vs. percentage of salary models
Hire in USA with KinzaHR’s EOR Services
Hiring US employees without establishing a company is a practical solution used by thousands of international businesses entering the U.S. American market.
For companies prioritizing speed, compliance, and flexibility, an Employer of Record (EOR) removes the legal and administrative barriers that slows down their expansion.
As your workforce grows and your long term USA presence becomes established, you can always reassess if forming your own entity is the next logical step.
FAQs
Can a foreign company hire US employees without incorporating in the USA?
A foreign company can hire US employees without incorporating in the USA, through an employer of record (EOR).
Do I need to register my business in every state where I hire a remote employee?
You need to register your business in every state where you are hiring your remote employees if you are hiring them directly, and not with an EOR.
What is the risk of hiring US workers as independent contractors?
Hiring US workers as independent contractors runs the risk of misclassification which can result in unpaid taxes, wage claims, penalties, interest, audits, and enforcement actions from the IRS, Department of Labor, and state agencies.
How long does it take to hire a US employee through an EOR?
It takes 3 to 7 business days to fully onboard a US employee through an EOR after they have accepted the offer.
What employment laws does an EOR manage?
An EOR manages federal employment law compliance for FLSA, FICA, ACA, Title VII, and Form I-9 requirements, alongside state payroll, leave, workers' compensation, and tax regulations.
When should a company establish its own US entity?
Your company should establish its own US entity when long term expansion with 20 or more employees is in the plans or you want complete control over employment policies and benefits.
