# EOR vs setting up a US entity

Source: https://launch-rec.com/compare/eor-vs-us-entity. Market: UK → US. Updated: 2026-09-16.

## Should a UK recruitment agency use an EOR or set up a US entity?

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.

## 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.

## FAQs

### 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.