Employer of Record vs. Owned Entity

Imagine a growing small business like yours, keen to explore new markets. But with limited resources in time, money, and staff, the thought of establishing your own entity abroad feels overwhelming. 

Here are some challenges you might face:

1. Managing local regulations, including ongoing payroll and tax compliance.
2. High upfront costs like registration fees and legal expenses.
3. Building a network of local contacts to support the setup.

Sound familiar? Don’t let these challenges hold you back. With Global Expansion, you can enter new markets and hire international talent without owning a legal entity. 

Let’s break down why an Employer of Record (EOR) could be your ideal partner.

Global Expansion Challenge Stats

• 75% of US companies fail when setting up foreign entities.
• 61,000+ regulations change globally every year.
• $10,000 per employee annually to stay compliant.
• 2+ years to establish an entity in some countries.
• 6+ years of record storage required after dissolution in certain locations.

Setting up your own entity isn’t cheap or quick. Let’s take a closer look at the costs involved.

1. Initial Registration and Incorporation Fees

Incorporating a company can cost thousands before you even get started. For example:

• United States: Filing fees range from $500 to $2,000 depending on the state, with legal fees adding another $1,000 to $5,000.
• Spain: You’ll need to deposit $3,000 in capital just to begin the process, with incorporation fees reaching several thousand dollars.
• Germany: Between commercial registration and notary fees, you could spend $2,000 to $3,000.

And that’s just the beginning. Legal requirements like drafting incorporation documents or obtaining tax IDs quickly rack up costs.

2. Ongoing Costs

Once your entity is set up, the bills keep coming. Annual expenses for maintenance and operations can run into tens or hundreds of thousands of dollars. Here’s what you’ll need to budget for:

• Office rent and utilities.
• Salaries, benefits, and payroll taxes.
• Insurance premiums (e.g., liability, office coverage).
• Legal and accounting services.
• Permits, licenses, and other regulatory fees.
• Corporate and VAT taxes.
• Global payroll and HR services like onboarding and benefits admin.

These recurring costs can drain your resources fast, especially for a small business.

3. Exit Costs

What happens if the new market doesn’t work out? Closing an entity comes with its own price tag. For example:

• UK: Dissolving a company takes at least three months and can cost £4,000 or more.
• After spending $60-120k to set up, exit costs can add up quickly.

With risks like these, it’s clear why many businesses turn to an Employer of Record instead.

Understanding EOR Services

An Employer of Record acts as the legal employer for your team in countries where you don’t have a local entity. Here’s how Global Expansion can help:

• Take care of contracts, salaries, benefits, and taxes.
• Ensure compliance with local labor laws.
• Let you focus on growth while we manage the legal and admin side.

Read more: How an EOR Fits with 2025 Talent Trends

Why an EOR is the Right Choice for Small Businesses

1. Cost Savings and Resource Allocation

By partnering with an EOR like Global Expansion, you avoid:

• High legal fees and compliance costs.
• Time-consuming administrative tasks.
• The need for physical office space or long-term staffing commitments.

This allows you to redirect resources into revenue-generating activities like product development or customer acquisition.

2. Flexibility to Scale

Global Expansion’s EOR services let you test new markets without committing to a full entity setup. Scale your workforce up or down based on demand, and adapt quickly to changing business needs.

3. Legal Compliance and Risk Reduction

With Global Expansion, you don’t have to worry about compliance headaches. Our team stays on top of local labor laws, so you can avoid costly penalties and legal disputes.

4. Reinvest in Growth

Free from the administrative burden of setting up your own entity, you can focus on what really matters: growing your business. Whether it’s innovation, customer retention, or exploring new opportunities, an EOR lets you put your resources to better use.

Read more: Game-Changing Global Hiring Strategies for Startups

Choose Global Expansion for Your EOR Needs

Global Expansion makes it easy to manage your global workforce with confidence and ease. With us, you can:

• Hire employees and contractors in compliance with local laws.
• Offer tailored contracts reviewed by our legal experts.
• Run payroll seamlessly across multiple locations.
• Automate onboarding and offboarding.
• Provide competitive benefits packages.
• Protect your intellectual property worldwide.

Ready to simplify global hiring? Let’s talk. 

Our expert team is here to answer your questions and help you take the next step toward international success. Schedule a call today and discover how Global Expansion can support your growth.