How to Set Up a Hiring Entity in the US: Step-by-Step Guide

Setting up a US hiring entity is a significant milestone for international companies expanding into the American market. But the process involves navigating federal, state, and local regulations that can be complex and confusing.

This guide walks you through every step of setting up a US hiring entity — from choosing the right entity type and state to registering for taxes and complying with employment law.

Why Set Up a US Entity?

When an Entity Makes Sense

• Hiring 5+ US employees: EOR costs become prohibitive at scale
• Long-term US presence: Building a permanent team or office
• Revenue generation: Selling to US customers from a US entity
• Investor requirements: US investors often require a US corporate structure
• Employer brand: US employees prefer working for a US entity

Entity vs. EOR: Quick Comparison

For companies with 1–5 employees, an EOR may be more practical For 5+ employees or long-term plans, setting up your own entity is usually more cost-effective.

Step 1: Choose Your Entity Type

C-Corporation (C-Corp)

Best for: Companies planning to raise US venture capital, go public, or have multiple shareholders

Advantages:

• Preferred by US investors
• No restrictions on number or type of shareholders
• Can issue multiple classes of stock
• Perpetual existence
• Established legal framework

Disadvantages:

• Double taxation (corporate tax + dividend tax)
• More complex compliance requirements
• Higher administrative costs

Limited Liability Company (LLC)

Best for: Small to medium teams, companies not planning to raise US VC

Advantages:

• Pass-through taxation (no double taxation)
• Flexible management structure
• Simpler compliance requirements
• Liability protection for members

Disadvantages:

• Less attractive to US investors
• Self-employment taxes for active members
• State-specific rules vary significantly

S-Corporation (S-Corp)

Best for: Small companies with US-based owners

Advantages:

• Pass-through taxation
• Self-employment tax savings
• Liability protection

Disadvantages:

• Limited to 100 shareholders
• Shareholders must be US citizens/residents
• Only one class of stock

Recommendation for most international companies: Start with a C-Corp if you plan to raise US capital. Start with an LLC if you’re bootstrapping or not raising US VC.

Step 2: Choose Your State

Delaware

Why most companies choose Delaware:

• Business-friendly court system (Court of Chancery)
• Well-established corporate law
• Privacy (no disclosure of shareholders)
• Preferred by US investors
• No state income tax on out-of-state revenue

Best for: C-Corps, companies raising VC, companies with remote employees across multiple states

Wyoming

Growing alternative to Delaware:

• No state income tax
• Low annual fees
• Strong privacy protections
• Simple compliance requirements

Best for: LLCs, small companies, privacy-focused businesses

California

Choose California if:

• Your team is primarily based in California
• You need to be in the Silicon Valley ecosystem
• Your business has significant California nexus

Warning: California has complex employment laws, high taxes, and aggressive enforcement. Only incorporate here if you have a strong reason.

Texas / Florida

Choose if:

• No state income tax
• Business-friendly environment
• Growing tech ecosystems
• Lower cost of living for employees

State Selection Matrix

Step 3: Register Your Entity

For a Delaware C-Corp

1. Choose a name: Must include “Corporation,” “Incorporated,” or “Inc.”
2. Appoint a registered agent: Required in Delaware (can be a service)
3. File Certificate of Incorporation: Filed with Delaware Division of Corporations
4. Pay filing fee: $89 minimum (varies by authorized shares)
5. Create bylaws: Internal governance rules
6. Issue stock: To founders and initial shareholders
7. Hold organizational meeting: Elect directors, adopt bylaws, authorize bank account

For a Delaware LLC

1. Choose a name: Must include “LLC” or “Limited Liability Company”
2. Appoint a registered agent: Required in Delaware
3. File Certificate of Formation: Filed with Delaware Division of Corporations
4. Pay filing fee: $90
5. Create Operating Agreement: Internal governance rules (not filed with state)
6. Obtain EIN: Apply with the IRS

Timeline

• State filing: 1–5 business days (expedited available)
• EIN application: 1–2 weeks (faster with ITIN/SSN)
• Bank account: 1–2 weeks
• Total: 2–6 weeks from start to operational entity

Step 4: Register for Federal and State Taxes

Federal Requirements

Employer Identification Number (EIN): Required for all entities with employees. Apply via IRS Form SS-4.

Federal income tax: C-Corps pay 21% federal corporate tax rate.

Employment taxes:

• Social Security: 6.2% (employer) + 6.2% (employee) on wages up to $168,600 (2026)
• Medicare: 1.45% (employer) + 1.45% (employee) on all wages
• Federal unemployment (FUTA): 6% on first $7,000 (usually 0.6% after state credit)

State Tax Registration

Register in each state where you have employees:

• State income tax withholding: Register with state tax authority
• State unemployment insurance (SUI): Rates vary by state and employer history
• State disability insurance: Required in CA, HI, NJ, NY, RI
• Workers’ compensation: Required in all states (purchased from private insurer)

Multi-State Considerations

If you hire employees in multiple states:

• Register as a foreign entity in each additional state
• Withhold state income tax for each employee’s state
• Comply with each state’s employment laws
• See our US hiring guide。 for state-by-state details

Step 5: Set Up Payroll

Payroll Options

In-house payroll software: Gusto, Rippling, ADP Run

• Best for: 1–50 employees
• Cost: $40–$150/month + $6–$12/employee
• Handles: Tax withholding, direct deposit, W-2 generation

Professional Employer Organization (PEO): TriNet, Justworks, ADP TotalSource

• Best for: 5–100 employees
• Cost: $100–$200/employee/month
• Handles: Payroll, benefits, compliance, HR support

Enterprise payroll: ADP Workforce Now, Paylocity, Paychex

• Best for: 50+ employees
• Cost: Custom pricing
• Handles: Full-service payroll and HR

Payroll Tax Calendar

Step 6: Employment Law Compliance

Federal Employment Laws

Fair Labor Standards Act (FLSA): Minimum wage ($7.25 federal, higher in many states), overtime (1.5× for hours over 40/week for non-exempt employees)

Title VII (Civil Rights Act): Prohibits discrimination based on race, color, religion, sex, or national origin

Americans with Disabilities Act (ADA): Requires reasonable accommodations for disabled employees

Family and Medical Leave Act (FMLA): 12 weeks unpaid leave for qualifying events (applies to employers with 50+ employees)

Equal Pay Act: Requires equal pay for equal work regardless of gender

State Employment Laws

State laws often go beyond federal requirements:

• Higher minimum wages: Many states/cities exceed $7.25 (e.g., $16.50 in Washington)
• Paid family leave: CA, NY, NJ, WA, and others require paid leave
• Salary transparency: CO, NY, CA, WA require salary ranges in job postings
• Non-compete restrictions: Many states ban or limit non-competes
• At-will employment: All states except Montana

Required Posters and Notices

Federal and state law requires posting employment law notices in the workplace. For remote employees, digital posting is usually acceptable.

Step 7: Set Up Benefits

Required Benefits

• Workers’ compensation insurance: Required in all states
• Social Security/Medicare contributions: Required for all employees
• Unemployment insurance: Required (federal and state)
• State-specific requirements: Disability insurance (CA, HI, NJ, NY, RI), paid family leave (various states)

Competitive Benefits

To attract top US talent:

• Health insurance: Employer-sponsored health insurance is expected (70% of employers offer it)
• 401(k) retirement plan: 85% of large employers offer this
• Paid time off: 10–20 days is standard (no federal requirement)
• Remote work stipend: $50–$200/month for home office expenses
• Professional development: $1,000–$5,000/year per employee

Common Mistakes to Avoid

1. Ignoring state-specific laws: Each state has unique employment regulations
2. Misclassifying employees as contractors: IRS and state agencies actively enforce this
3. Not registering in employee states: You must register in every state where you have employees
4. Skipping workers’ comp: This is required before your first employee starts
5. Underestimating compliance costs: Budget 20–30% above salary for employer costs

FAQ

How long does it take to set up a US entity?

4–8 weeks for a basic entity. Add 2–4 weeks for state registrations, tax accounts, and bank setup. Total time to operational entity with first employee: 6–12 weeks.

How much does it cost to maintain a US entity?

Annual costs include: state franchise tax ($400–$250,000 in Delaware), registered agent ($100–$300/year), annual report filings ($50–$800/state), and accounting/tax preparation ($3,000–$10,000/year).

Should I choose Delaware or my employee’s state?

Delaware is usually best for C-Corps (investor preference) and LLCs with employees in multiple states. If all employees are in one state, incorporating there may simplify compliance.

Do I need a US bank account?

Yes, for payroll and tax payments. Most US banks require in-person account opening, though some (Mercury, Brex) allow remote setup for Delaware entities.

Can I hire in multiple US states?

Yes, but you must register as a foreign entity and set up tax accounts in each state. This adds complexity and cost. Consider a payroll provider。 that handles multi-state compliance.

Ready to Transform Your Hiring?

Setting up a US entity is a significant step — but with the right guidance, it’s straightforward. Once established, you’ll have full control over your US team and operations.

Try EasyHire AI free or Book a demo to see how our platform helps US companies hire efficiently once their entity is established.