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:
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.
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:
Setting up your own entity isn't cheap or quick. Here's where the money goes.
Thousands, before you've done anything productive.
Then come the incorporation documents, the tax IDs, and the adviser hours to produce them.
Everything you'd expect from running a company, in a country where you don't yet know anyone.
For a small business, these are the costs that quietly eat the budget you'd earmarked for actually growing.
More than most people plan for, and it takes months.
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.
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.
Read more: How an EOR Fits with 2025 Talent Trends
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.
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.
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.
Nobody at a small company has spare capacity to learn Spanish employment law. An EOR means nobody has to.
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.
We've been doing this for over 20 years across 214 countries and territories. With us you can:
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.
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.
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.
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.
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.
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.
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.