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Registering a foreign entity or subsidiary is the traditional way of incorporating and expanding your business in a foreign country or jurisdiction.
Startups must follow specific protocols laid out by the jurisdiction in which they are registering, which involves checking eligibility, collating and filing documentation, collecting certificates of registration, opening local bank accounts, and fulfilling annual reporting requirements.
Registering a foreign entity exposes startups to the laws and regulations of the foreign country and does not necessarily protect the intellectual property created by international workers. Establishing a local presence through an EOR is often safer and more advantageous.

"},{"id":1172,"__component":"content.rich-text","content":"

In the era of global hiring, there are many ways to expand your startup to new countries, states, and provinces, including hiring full-time employees through an employer of record (EOR) or working with foreign independent contractors.

However, for some companies, particularly those that plan to hire many employees in a particular location, opening their own local entity can seem like the most commonsensical route to ensure you benefit from local protections, avoid permanent establishment risk, and protect intellectual property.

This article goes over the process of registering a foreign entity, the pros and cons, and why using an EOR provider like Deel could still be the superior option.

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[Before Deel,] setting up a legal entity in a new location took a lot of paperwork, bureaucracy, and time. [Since using Deel], we’ve saved a lot of time and money but also reduced the team’s administrative load for a quicker turnaround.

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Note: Opening a foreign entity does not automatically protect the intellectual property created by your international workers. In some countries, IP rights default to the creators. Hence, international hires must sign country-specific non-disclosure agreements to transfer IP ownership to you and prevent them from sharing proprietary information.

","background_color":"blue","cta":[]},{"id":1175,"__component":"content.rich-text","content":"

Why wouldn’t you want to register a foreign entity?

Besides being an expensive and lengthy process, registering a foreign entity is often a double-edged sword for startups hoping to officiate in a new country or state.

Overwhelming compliance responsibilities

A registered company must follow the corporate laws of that new country or jurisdiction, and often the laws tend to be complex for corporate entities. There are also a lot of law amendments that could impact your startup, so remaining up-to-date and implementing ahead of cut-off dates is important to maintain compliance.

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Take a country like France. If you establish an entity there, the people you hire—you’re going to have to pay pensions to them for the rest of their lives. It’s a huge liability. EOR is a great opportunity to test out new markets and make sure it works before you do invest and actually establish an entity.

","person":"Steve Hoffman","position":"Strategic Partnerships","color":"blue"},{"id":1176,"__component":"content.rich-text","content":"

Reduced agility

The time and money investment in opening a foreign entity commits startups to a new market. If the new entity starts to struggle, it’s common for founders to retain the foreign entity longer than necessary in hopes that the circumstances will improve or recover. This hesitation can result in large financial losses and delay the company from exploring other more lucrative markets.

"},{"id":181,"__component":"content.quote","quote":"

Deel enabled us to achieve our mission to reach and expand new markets in a faster turnaround time. I would say it saved us at least 12 to 24 months of effort. I’d recommend Deel to anyone who would like to expand globally and has limited time and resources to build the capability internally.

","person":"Nupur Mehta","position":"VP of Human Resources","color":"blue"},{"id":1177,"__component":"content.rich-text","content":"

More convoluted and less control

When a startup establishes a foreign entity, they often outsource core functions such as compliance, payroll, and HR to external providers. Building internal teams and learning these new processes in a foreign location is a huge undertaking. While outsourcing is a great way to benefit from local knowledge and expertise, it often results in a disjointed and inconsistent worker experience and a lack of control for the company.

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While we were very comfortable with hiring locally, we were apprehensive about the costs and legal responsibilities for compliance in the United States. We didn’t want to hire full-time HR people to figure out things like health benefits and filing tax returns with the IRS…now we know we can trust Deel to manage the complexities of hiring in the US. It’s something we have to get 100% right, for our people and for our business.

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Deel enabled us to hire 100 people that we probably wouldn’t have been able to hire otherwise,” says Schofield. “Plus, it helped us reduce the number of workers leaving us. A lot of contractors were leaving when we couldn’t support them in being employees.

","person":"Leanne Schofield","position":" Head of People","color":"blue"},{"id":1179,"__component":"content.rich-text","content":"

Receive built-in compliance support

We’ve built compliance into our intuitive hiring platform. Our legal experts are on standby 24/7 to support and ensure your startup remains current on local laws and regulations.

Using the Deel platform, you can compliantly:

Generate employment contracts and contractor agreements tailored to local labor laws
Automate compliance documentation collection
Request the signing of DPA, and privacy agreements to protect your intellectual property
Receive visa and immigration support
Receive support assigning worker status to avoid misclassification
Run payroll in alignment with local payroll laws
Run background checks
Administer mandatory benefits
Manage terminations

"},{"id":184,"__component":"content.quote","quote":"

Deel gives us access to hiring people in a compliant way, anywhere. Those are people that we wouldn’t have been able to hire without Deel, as we wouldn’t be able to open an entity in every country where we wanted to hire someone. It also enables us to be close to our customers, they are all over the world, so we need to be there too.

","person":"Sanna Westman","position":"Head of People","color":"blue"},{"id":1180,"__component":"content.rich-text","content":"

Enjoy payment flexibility

Instead of outsourcing payroll to a local payroll provider, you can pay your local and international employees and contractors worldwide via a single platform. You retain control of the entire payroll process, and your workers receive a consistent experience no matter where they live with flexible withdrawal methods.

"},{"id":396,"__component":"content.inline-textbox","headline":null,"description":"

We’ve recently introduced new flexible payroll cut-off dates so that you have triple the time than other systems to submit salaries, approve expenses, and add bonuses every month. Plus, we’ve introduced on-demand payment options, allowing you to pay your team off-cycle in case an emergency arises or you need to make a last-minute adjustment.

","background_color":"blue","cta":[]},{"id":1181,"__component":"content.rich-text","content":"

Using the Deel platform, you can automate the following:

Employee benefit contributions and withholdings
Payslip creation and delivery
Tax filing with local authorities
Global analytics and reporting

Over 15,000 businesses have chosen to streamline global payroll operations with Deel.

"},{"id":185,"__component":"content.quote","quote":"

No more delays in payment! Ease of use - no need to be tech-savvy, payments made on time - no delays, advance salary for emergency situations, organized tracking of payments and invoices, several payment options to choose from, perks and insurance.

","person":"Steph Adelantar","position":"Customer Support Specialist","color":"blue"},{"id":1182,"__component":"content.rich-text","content":"$1f"},{"id":186,"__component":"content.quote","quote":"

I can’t imagine having to open up an entity in a certain city just to be able to hire someone. Deel solves a real problem, and up to now, we’ve been very happy with the service.

","person":"Elias Ek","position":"Co-Founder","color":"blue"},{"id":1183,"__component":"content.rich-text","content":"$20"}],"campaign_category":[],"product_category":[],"business_size":[],"resources_for":[],"toc_cta":{"id":6089,"label":"Try Deel","type":"primary","cta_type":"link","link":"https://www.deel.com/request-a-demo","target":"self","start_icon":null,"end_icon":null,"modal_title":null,"helper_text":null,"long_link":null,"forms":{"data":[]}},"author":{"data":{"id":35,"attributes":{"first_name":"Jemima","last_name":"Owen-Jones","about":"

Jemima is a nomadic writer, journalist, and digital marketer with a decade of experience crafting compelling B2B content for a global audience. She is a strong advocate for equal opportunities and is dedicated to shaping the future of work. At Deel, she specializes in thought-leadership content covering global mobility, cross-border compliance, and workplace culture topics.

","createdAt":"2024-08-05T15:10:44.179Z","updatedAt":"2025-04-25T09:05:08.091Z","publishedAt":"2024-08-05T15:15:57.507Z","locale":"en","position":"Content Marketing Manager, Global Hiring","company":"Deel","avatar":{"data":{"id":4042,"attributes":{"name":"jemima owen-jones.jpeg","alternativeText":null,"caption":null,"width":512,"height":512,"formats":{"small":{"ext":".jpeg","url":"https://deel-website-media-prod.s3.amazonaws.com/small_jemima_owen_jones_13ca574f1f.jpeg","hash":"small_jemima_owen_jones_13ca574f1f","mime":"image/jpeg","name":"small_jemima owen-jones.jpeg","path":null,"size":35.42,"width":500,"height":500},"thumbnail":{"ext":".jpeg","url":"https://deel-website-media-prod.s3.amazonaws.com/thumbnail_jemima_owen_jones_13ca574f1f.jpeg","hash":"thumbnail_jemima_owen_jones_13ca574f1f","mime":"image/jpeg","name":"thumbnail_jemima owen-jones.jpeg","path":null,"size":5.78,"width":156,"height":156}},"hash":"jemima_owen_jones_13ca574f1f","ext":".jpeg","mime":"image/jpeg","size":28.61,"url":"https://deel-website-media-prod.s3.amazonaws.com/jemima_owen_jones_13ca574f1f.jpeg","previewUrl":null,"provider":"aws-s3","provider_metadata":null,"createdAt":"2024-08-19T13:11:32.748Z","updatedAt":"2024-08-19T13:11:32.748Z"}}},"localizations":{"data":[]}}}},"localizations":{"data":[]},"__page":"blogs"},"enable_confetti_animation":null,"children":["$","$21",null,{"fallback":null,"children":[["$","$L22",null,{"moduleIds":["components/@AppLayout/AppContainer/AppContainerBase.tsx -> @/components/@AppPages/SingleBlogPage"]}],"$L23"]}]}]}]]}]