Expanding your recruitment business into the U.S. market can be a major opportunity, but it comes with significant legal and administrative requirements. The U.S. offers scale and diversity, but its business environment is highly regulated and can feel complex for companies based abroad.
Setting up a U.S. entity gives recruitment firms maximum control over how they operate. You can run payroll directly, contract freely with clients, and build your own presence in the market. However, that level of control also comes with ongoing responsibilities. Here are the key stages involved in setting up your business in the United States as an international firm.
Choosing the State of Incorporation
One of the first decisions you will face is where to incorporate your US entity. Delaware often gets a lot of attention because of its well-developed corporate law system, and states like Delaware and Wyoming can be attractive for specific strategic reasons, such as raising venture capital or holding intellectual property. However, for most recruitment firms, those advantages are outweighed by the added complexity, ongoing fees, and minimal real-world tax benefit. In practice, it is usually more straightforward to incorporate directly in the state where you plan to operate. Unless you have a clear legal or investment-driven reason to do otherwise, incorporating where you will actually be hiring staff and serving clients is often the most practical approach.
Selecting the Right Entity Type
The next step is to choose the appropriate entity structure. Many international firms opt for a
- Limited Liability Company (LLC) – many international firms opt for LLC, which provides flexibility and allows the business to be treated either as a pass-through entity or taxed as a corporation.
- C-Corporation – this is a separate legal and tax entity and is often the preferred route if the company expects to grow quickly, raise capital, or attract investors.
It’s important to note that the S-Corporation model is not available to non-resident foreign shareholders under IRS rules, so this option is generally off the table for UK recruitment firms.
Registering the Company
Once the entity type and state have been chosen, the company must be formally registered. This involves filing the relevant formation documents – such as Articles of Organization for an LLC or a Certificate of Incorporation for a corporation – with the Secretary of State’s office. Filing fees vary by state and must be paid at the time of registration and then annually. During this stage, the company also officially appoints its registered agent. Only after this step is complete does the business legally exist in the United States.
Obtaining an EIN
With the entity established, the next requirement is to obtain an Employer Identification Number (EIN) from the Internal Revenue Service. This number is the equivalent of a business tax ID and is necessary for almost all aspects of running a company, from filing tax returns to paying employees. For foreign-owned businesses, the process is slightly more complex. Unlike US firms, which can apply online, international companies must submit a Form SS-4 by fax or phone directly to the IRS. Once issued, the EIN becomes a central identifier that will be used for payroll, tax filings, and opening bank accounts.
Opening a US Bank Account
Recruitment firms will also need to establish a US-based business bank account. This is essential for processing payroll, receiving client payments, and paying local taxes. Traditionally, opening a bank account has required a company officer to visit the US in person, though some fintech providers now offer remote solutions. Typically, most bank will ask for incorporation documents, the EIN, proof of ownership, and in many cases, a US mailing address. Because banking is highly regulated, firms should allow time for this process and ensure all paperwork is complete.
System Adjustments and Insurance Compliance
Expanding into the US also means adjusting your internal systems to match American ways of working. Payroll, tax reporting, and even accounting software may need to be “Americanised” so they align with US tax structures, deadlines, and compliance standards. It is equally important to revisit your insurance coverage. Many global insurance policies arranged through international brokers do not automatically extend to US-specific risks or satisfy state-level legal requirements. Partnering with a US-based insurance broker ensures your business has the right workers’ compensation, liability, and other mandatory coverage in place from day one.
Employment and Payroll Compliance
Once the financial and legal structures are in place, attention must turn to payroll and employment law. At the federal level, employers must withhold income tax as well as Social Security and Medicare contributions from employee wages, while also paying their own employer-side obligations for FICA and FUTA taxes. On top of this, each state sets its own payroll tax rules, so obligations will vary depending on where employees are located. Every hire must complete a Form W-4 for tax withholding purposes and a Form I-9 to verify work authorization. Employers are also bound by the Fair Labor Standards Act, which governs minimum wage, overtime, and record-keeping, though state laws may be stricter than federal rules.
Ongoing Compliance
Finally, once the business is up and running, the work does not stop. Ongoing compliance includes filing annual reports with the state and submitting both federal and state corporate income tax returns. Payroll filings must also be made quarterly and annually. Staying compliant is a continuous responsibility, and many firms retain legal or tax advisors to help manage the ongoing workload.
How an EOR Can Be the Solution You Need
For some recruitment firms, the burden of setting up and maintaining a full US entity may feel disproportionate to their immediate hiring plans. An Employer of Record (EOR) can be your solution.
An EOR acts as the legal employer of record for your staff, handling payroll, benefits, employment taxes, and compliance on your behalf. By partnering with an EOR, you can bypass many of the steps outlined above, including:
- Incorporation
- EIN registration
- Opening a bank account
- Managing payroll compliance
The EOR already has the legal infrastructure in place, meaning you can begin hiring US-based staff far more quickly. If you’re ready to start your U.S. journey – get in touch with our team today.
Disclaimer: Please note this blog doesn’t include every single step you may need to take, but the most common things you’d need to consider.