For most small businesses hiring fewer than about 15 people in a country, an Employer of Record costs less than owning an entity. An entity runs $60,000 to $120,000 to set up and carries legal, accounting and filing costs every year after. An EOR is a per-employee fee with no setup and no exit cost. The maths flips once headcount is high enough that per-employee fees exceed fixed overheads, or the moment you need to trade locally, which an EOR can't do for you.
Here's what each actually costs, and how to work out which side of the line you're on. Updated September 2026.
| Employer of Record | Your own entity | |
|---|---|---|
| Setup cost | None | $60,000 to $120,000 |
| Time to first hire | Days to weeks | Months, and 2+ years in some countries |
| Ongoing cost | Flat fee per employee | Rent, legal, accounting, filings, permits |
| Compliance liability | Sits with the EOR | Sits with you |
| Exit cost | A notice period | £4,000+ and three months in the UK alone |
| Can you invoice locally? | No | Yes |
| Best at | Testing a market, small teams, speed | Committed presence, larger teams |
You want to move into a new market. You've got limited time, limited money, and nobody spare to run an incorporation. Setting up an entity abroad feels like a lot, because it is.
Three things tend to stop small businesses in their tracks:
- Local regulations you have to keep up with, month after month.
- Registration fees and legal bills before you've hired anyone.
- Finding local people you can trust to set it all up.
None of that is a reason to stay home. With an Employer of Record, you can hire in a new market without owning anything in it.
What does it cost to set up your own entity?
Between $60,000 and $120,000 to get started, and tens of thousands a year to keep running. The exact figure depends heavily on the country.
Some context on the scale of it:
- 61,000+ regulations change globally every year.
- Around $10,000 per employee annually just to stay compliant.
- 2+ years to establish an entity in some countries.
- 6+ years of record storage required after dissolution in certain places.
Setting up your own entity isn't cheap or quick. Here's where the money goes.
How much are registration and incorporation fees?
Thousands, before you've done anything productive.
- United States: $500 to $2,000 in filing fees depending on the state, plus $1,000 to $5,000 in legal fees.
- Spain: a $3,000 capital deposit just to start, then several thousand more in incorporation fees.
- Germany: $2,000 to $3,000 across commercial registration and notary fees.
Then come the incorporation documents, the tax IDs, and the adviser hours to produce them.
What are the ongoing costs of an entity?
Everything you'd expect from running a company, in a country where you don't yet know anyone.
- Office rent and utilities.
- Salaries, benefits, and payroll taxes.
- Insurance premiums.
- Legal and accounting services.
- Permits, licenses, and regulatory fees.
- Corporate and VAT taxes.
- Payroll and HR services: onboarding, benefits admin, the rest.
For a small business, these are the costs that quietly eat the budget you'd earmarked for actually growing.
What does it cost to close an entity down?
More than most people plan for, and it takes months.
- UK: dissolving a company takes at least three months and costs £4,000 or more.
- That's on top of the $60,000 to $120,000 you already spent setting it up.
This is the part worth sitting with. The cost of an entity isn't only what you pay to open it. It's what you're committed to if the market doesn't work.
How does an Employer of Record work?
An EOR is the legal employer for your people in a country where you have no entity. You direct their work. We handle everything else.
- Contracts, salaries, benefits and taxes.
- Compliance with local labour law.
- The admin, so you don't build a team to manage it.
Read more: How an EOR Fits with 2025 Talent Trends
Why do small businesses choose an EOR over an entity?
It costs less at small headcounts
No legal fees. No compliance overhead. No office lease and no long-term staffing commitment before you know the market works. That money goes into product or customers instead.
You can change your mind
Test a market with two people. Scale to twenty if it works. Leave with a notice period if it doesn't. None of that is possible once you've incorporated.
Someone else carries the compliance risk
Local labour law moves constantly, and the penalties for getting it wrong are real. With an EOR, that liability sits with us, not with you.
Your team stays focused
Nobody at a small company has spare capacity to learn Spanish employment law. An EOR means nobody has to.
Read more: Game-Changing Global Hiring Strategies for Startups
When is your own entity the better choice?
When you need to trade locally, or when headcount makes the maths work.
An EOR employs people. It doesn't let you invoice local customers, hold local licences, or sign certain contracts. If you need any of those, you need an entity regardless of what hiring costs.
And past a certain headcount, usually somewhere above 15 employees in one country though it varies by market and salary band, a flat fee per employee starts to exceed what fixed entity overheads would cost. At that point, incorporating is the cheaper answer.
Plenty of companies do both: an EOR to get in and prove the market, an entity once the commitment is real.
Work with Global Expansion
We've been doing this for over 20 years across 214 countries and territories. With us you can:
- Hire employees and contractors compliantly under local law.
- Give people contracts our legal team has reviewed.
- Run payroll across multiple countries at once.
- Automate onboarding and offboarding.
- Offer benefits that compete locally.
- Protect your IP worldwide.
Schedule a call and tell us which market you're looking at. We'll tell you straight whether an EOR or an entity is the better answer for it.
Frequently asked questions
Is an EOR cheaper than setting up an entity?
At small headcounts, yes, usually by a wide margin, because there's no setup cost and no fixed overhead. The gap narrows as you hire more people in the same country. Somewhere above roughly 15 employees, the entity typically becomes cheaper, though it depends on the market and what you're paying.
How long does it take to hire through an EOR?
Days to a few weeks, depending on the country and how quickly right-to-work checks clear. Compare that with months for an incorporation, and over two years in some markets.
Who is legally responsible for the employee?
The EOR. We hold the contract, run the payroll, file the taxes and carry the compliance liability. You direct the day-to-day work, and you keep responsibility for how you manage the person.
Can I switch from an EOR to my own entity later?
Yes, and plenty of companies plan for exactly that. Use an EOR to enter the market and prove it works, then incorporate and transfer the team once the commitment makes sense. Talk to your provider early so the transfer is clean.
What can't an EOR do?
It can't trade for you. No local invoicing, no local licences, no signing contracts that require a local legal entity. If your business model needs any of those in-country, an entity isn't optional.
What happens if I leave the market?
With an EOR you end the agreement and work through the local notice and severance rules. With an entity you liquidate: three months minimum in the UK, and £4,000 or more, before anyone's done anything else.
