Do I Need a Local Entity to Hire in The United States?

In the United States, a "local entity" typically refers to a business structure such as a corporation or limited liability company (LLC) that is registered to operate within the country. This entity allows you to be recognized as an employer and to fulfill local payroll and employment obligations. Without establishing a local entity, your company cannot directly hire employees, manage payroll, or comply with U.S. labor laws.

However, if you want to hire employees in the U.S. without the complexities of setting up a local entity, you can consider using an Employer of Record (EOR). An EOR acts as the legal employer, managing payroll, taxes, and compliance while you maintain control over the employee's work.

What is Required to Employ Someone in The United States?

• Local employing entity required to directly employ? Yes (unless using an EOR)
• Payroll registration required? Yes (must register with the IRS and state tax authorities)
• Withholding/tax remittance required? Yes (federal and state taxes must be withheld from employee pay)
• Social contributions required? Yes (employers must pay Social Security and Medicare taxes)
• Local employment agreement required? Yes (written agreements are standard practice)
• Mandatory benefits to budget? Yes (health insurance, unemployment insurance, and workers' compensation)
• Works council/collective agreements considerations? Usually no (U.S. labor laws do not mandate works councils)

Best Options If You're Hiring in The United States

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should be cautious about misclassification risks.

In the U.S., hiring contractors can be a flexible option, but it’s crucial to ensure that the contractor is genuinely independent. Misclassifying an employee as a contractor can lead to significant legal and financial consequences. Here are some key points to consider:

• Ensure the contractor has control over how they complete their work.
• Limit your oversight to avoid creating an employer-employee relationship.
• Be aware that if the contractor performs core business functions, the risk of misclassification increases.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in the United States, depending on state registrations and requirements.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated $300–$1,000 per month (depends on transaction volume)
• Payroll provider: Estimated $100–$300 per employee per month (depends on payslip complexity)
• Employer registrations and recurring compliance: Estimated $200–$500 per year (varies by state)
• Corporate tax filings and annual reporting: Estimated $500–$2,000 per year (varies by entity size)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in The United States

Hiring in the United States can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in the United States quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.