A Guide to EOR vs Own Entity Setup for SMBs

Guide overview

When expanding internationally and pursuing global hiring, small and midsize businesses must decide whether to open an entity or use an employer of record (EOR). Each option has distinct advantages, challenges, and implications. This guide delves into both alternatives, highlighting their respective use cases, cost factors, and strategies for selecting the most suitable option for your business.
An Employer of Record (EOR) lets businesses legally engage employees in a foreign country without a local entity, simplifying global employment and expansion. Conversely, a business entity is an organization established as a distinct legal entity, domestically or abroad. This setup enables businesses to engage in local hiring practices and provides the infrastructure or legal framework to establish physical business premises
Deciding between an EOR partner and entity setup is complex. Your choice will impact scalability, market speed, compliance, HR, and exit strategies. Answer the key questions in this guide to identify the optimal solution for your business

Who will benefit from this guide?

CEOs, owners, and founders looking for the best way to test the waters in different markets and rectify any operational legal and compliance gaps with limited time and resources
HR teams looking for the best solution to hire international employees in new global markets and comply with local labor laws and regulations while remaining lean
Finance teams looking to address poor experience caused by outdated vendors engaged during the cash-strapped days

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FAQs

Will this guide help me understand which route is best for ensuring compliance?

Yes. This comprehensive guide will assist you in discerning whether engaging an EOR as your legal employer or establishing a local entity offers the best path to compliance with local labor laws and regulations. It will present in-depth comparisons and practical examples detailing the advantages and constraints of both alternatives. Additionally, it will explore which method is more effective in managing benefits administration, localizing employment contracts, and ensuring payroll compliance.

Will this guide help me choose the best long-term solution?

Yes. This guide aims to help you make the best long-term choice between using an EOR and setting up your entity. It dispels common myths and misconceptions about EOR being merely a temporary fix and illustrates that choosing between the two options isn’t a binary, all-or-nothing decision. Deel provides a comprehensive solution that allows companies to leverage EOR services in certain markets while opting for Entity Setup services in others, ensuring flexibility and optimization of your global workforce strategy.

Will this guide help me choose the most cost-effective solution?

Yes. This guide will help readers identify the most cost-effective solution between an EOR and entity setup. It highlights that business owners do not need to invest thousands of dollars and undergo a time-consuming entity formation process if they are not ready. An EOR can provide a flexible and economical alternative for expanding globally.