Compare · UK → US
Employer of record vs Own US entity
Should a UK recruitment agency use an EOR or set up a US entity?
The verdict
Use an EOR for your first placements — it puts you live in weeks with no entity, state registrations or payroll build. Form your own entity once you can see sustained volume, typically past roughly ten contractors or a second state, where per-head EOR fees start to exceed the cost of running it yourself.
Reviewed by James Doyle · Updated 2026-09-16
Side by side
| Factor | Employer of record | Own US entity |
|---|---|---|
| Time to first placement | 1 to 3 weeks | 6 to 12 weeks including registrations |
| Upfront cost | Minimal | Entity, insurance, payroll, advisers |
| Cost per head | Fixed fee or percentage per worker | Falls as headcount rises |
| State registrations | Handled by the EOR | Yours in every worksite state |
| Client perception | Fine for contract; less credible for enterprise MSP | Required by many enterprise procurement teams |
| Control | Limited — the EOR is the legal employer | Full |
Choose Employer of record if
- You are testing US demand and want to be live this month
- Placements are spread across states you do not yet want to register in
- You have no US payroll or insurance infrastructure
Choose Own US entity if
- You have sustained volume in one or two states
- Enterprise or MSP clients require a US contracting entity
- You want to own the payroll margin and the client relationship outright
The trigger is usually the second state, not the tenth head
Payroll tax registration follows the worksite. One placement in a new state can trigger withholding registration, unemployment insurance and workers' compensation cover there. An EOR absorbs that overhead entirely, which is why scattered early placements suit it.
Once demand concentrates — one metro, one niche, repeat orders — the arithmetic flips and an entity plus a payroll funder is cheaper per head.
Run both for a period
There is no rule against keeping an EOR for edge-case states while your own entity handles your core states. Many UK agencies expanding into the US do exactly that for the first two years.
Common questions
Is an EOR the same as a PEO?
No. An EOR is the legal employer of a worker in a place where you have no entity. A PEO co-employs your own internal staff alongside your entity, mainly to access benefits pricing. Agencies confuse the two constantly.
Do I need a US entity to invoice US clients?
Not always — a UK entity can invoice a US client — but many enterprise procurement teams and MSP programmes require a US contracting entity and a US bank account, and withholding rules can complicate payment.
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