Most people think the legal entity is the right choice. It offers you and the employee similar hiring conditions and removes all the risks other than tax and legal compliance. Clients still have the full authority for recruitment, onboarding, and hiring, and they also manage the employee.

The issue becomes the cost of setting up a legal entity; it’s expensive to do so. Most HR and legal teams find it challenging and pricey to navigate the local tax and employment labor laws in place, and it takes a lot of time.

You’ll probably have to work closely with a local finance and tax lawyer, and those average hourly rates can be expensive.

Before the employee can start working, you’ll have to appoint a local direct, set up payroll, and open a local bank account. Similarly, you’re responsible for all employee and corporate tax obligations.

Though a legal entity has been the way most companies choose to expand, it may not be a viable solution. Luckily, there are other options, which we discuss below.

However, the company must ensure that the workers are classified as contractors instead of employees. These professionals will have to fill out the documentation, and the business owner must collect and make sure it’s all completed correctly.

There are various regulations and laws on hiring international contractors, and they vary based on the country. Typically, clear independence is necessary, so it can be problematic to hire them for a sales role.

Independence and control are separate things, and here are a few ways to determine which one you’re offering:

Though a legal entity has been the way most companies choose to expand, it may not be a viable solution. Luckily, there are other options, which we discuss below.

When ? Who controls the hours worked each week and when?

Where ? Will the individual have to be at the company office, or will they work at home?

How ? How is the work done, and who will complete it? What’s the payment structure like? Will this be an exclusive relationship, or can the individual work in other companies, as well?

The EOR is a third party and handles:

• Compliance - This includes employment contracts, local labor laws, and other regulations.
• Taxes and Payroll – This includes processing the necessary deductions and withholding, tax registration, payments, and more.
• Local Benefit Administration – This includes attractive and compliant benefit packages, registration for health insurance, local pension funds, and more.
• Termination – The professional will manage the separation process based on local standards.

Generally, an EOR is a more cost-effective and quicker solution to help businesses expand because they can explore new markets and don’t have to commit immediately. While there are always likely to be limitations, it’s still an excellent choice where applicable.