Employer of Record vs Own Entity: What to Choose in 2025

TL;DR

An Employer of Record (EOR) is a third-party company that legally employs workers on your behalf in countries where you lack a local entity, managing payroll, taxes, benefits, and compliance, while you oversee their day-to-day work.
Setting up your own legal entity offers full operational control and a stronger local presence but demands significant upfront costs, ongoing administration, compliance, and time.
Choose an EOR when you need rapid market entry, flexibility for short-term projects, lack local regulatory expertise, or want to minimize administrative and compliance burdens.
Choose your own entity when you plan a long-term presence with larger teams, require full control over HR policies and contracts, or aim to build strong local brand credibility.
Transition from EOR to your own entity when your team expands, costs justify entity ownership, or you need greater control, ensuring proper timing and expert guidance.

Need help with your international expansion? Contact our team to learn how we can help streamline your global expansion.

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Looking to expand globally and wondering whether to use an Employer of Record (EOR) or set up your own legal entity? In our experience helping US-based businesses build global teams, choosing between an Employer of Record (EOR) and setting up your own legal entity means carefully weighing cost, compliance, speed to market, and operational control, insights crucial for business leaders and HR professionals navigating international hiring. This guide offers clear, actionable advice to help shape your global hiring strategy.

What does it mean to set up your own entity?[toc=What is Setting up an Entity]

Setting up your own entity means creating a legally recognized business entity, such as a subsidiary or branch office, that lets you hire employees directly, manage operations, and establish a local presence. This classic approach offers full control but comes with significant responsibilities, costs, and compliance challenges.

Typically, it involves:

Registering with local authorities and securing licenses
Navigating local tax, labor laws, and ongoing compliance
Establishing payroll, benefits, and HR services
Managing office space and daily operations
Handling annual reporting and audits

While this path demands time, resources, and expertise, it’s ideal for companies committed to long-term investment and full operational control in a new market.

What is an Employer of Record (EOR)?[toc=What is an EOR]

An Employer of Record (EOR) is a third-party organization that legally employs workers on your behalf in a specific country, handling all employer responsibilities so you don’t need to set up your own local entity. For US-based companies expanding globally, an Employer of Record is a proven solution to quickly enter new markets while staying compliant with local labor laws and avoiding administrative burdens.

With an EOR, you manage your team’s daily work, while the EOR takes care of legal, payroll, and compliance tasks behind the scenes.

Here’s what an Employer of Record typically handles:

Drafting and maintaining locally compliant employment contracts
Running payroll and ensuring timely, accurate employee payments
Withholding and filing employment taxes and social contributions
Administering statutory and supplemental benefits like health insurance and paid leave
Navigating complex local labor laws to keep your business compliant
Managing onboarding, offboarding, and all employment documentation

From our experience supporting global employers, partnering with an Employer of Record (EOR) quickly accelerates your market entry while ensuring your peace of mind through local expertise in compliance and payroll.

What are the key differences between a legal entity setup and using an Employer of Record?[toc=EOR vs Own Entity]

Based on our experience guiding global employers, choosing between establishing a legal entity or partnering with an Employer of Record (EOR) impacts more than just compliance, it influences your speed to hire global talent, overall costs, level of control, and business flexibility. This critical decision affects how quickly you enter new markets, the risks you assume, and your ability to scale your international workforce efficiently.

To make things as clear as possible, here’s a side-by-side comparison of what you can expect with each approach:

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What are the key differences between a legal entity setup and using an Employer of Record? — Employer of Record vs. Own Entity: EOR offers a quick, low-risk entry into new markets, while setting up your own entity provides full control for long-term investment

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Detailed Comparison: Employer of Record vs Own Entity Setup
Aspect	Employer of Record (EOR)	Own Entity Setup
Setup Costs	Low or no upfront investment; pay a monthly service fee	High initial costs for registration, legal, and office setup
Time to Market	Fast—hire in days or weeks	Slow—can take months to get started
Compliance	EOR manages payroll, taxes, benefits, and local labor law compliance	You handle all legal, tax, and HR compliance yourself
Administrative Burden	EOR takes care of HR, payroll, and benefits	You manage all HR, payroll, and admin tasks
Control	You direct daily work; EOR is the official employer for contracts and payroll	Full control over operations, policies, and contracts
Scalability	Easy to scale up or down quickly	Scaling can be slow and requires more resources
Flexibility	Great for testing new markets or short-term projects	Best for long-term, stable operations
Brand Presence	Limited visibility as a local employer	Strong local presence and brand recognition
Ongoing Costs	Predictable monthly fee, minimal admin overhead	Ongoing costs for HR, payroll, office, and compliance
Risk & Liability	EOR reduces compliance risk, but you should still vet your EOR partner	All compliance and legal risks rest with your company

Understanding these key differences helps you confidently choose the best global hiring strategy that fits your business goals.

What are the pros and cons of setting up a own entity?[toc=Pros & Cons of Entity Setup]

If you’re committed to a long-term presence abroad and want full control over your global team, establishing a legal entity is the traditional route. From our experience in helping global companies establish their own entities, this approach offers significant advantages but also presents challenges that many underestimate.

Pros and Cons of Legal Entity Setup
Pros	Cons
Full control over HR, payroll, policies, and daily operations	High upfront costs for registration, legal, and office setup
Strong local brand presence and credibility	Ongoing expenses for compliance, HR, payroll, and local advisors
Ability to customize benefits, policies, and company culture	Takes months to set up—delaying your ability to hire and onboard talent
Direct employer-employee relationships	Significant administrative burden and time commitment
Better suited for long-term, large-scale hiring and market expansion	Increased legal and compliance risks—mistakes can lead to fines or reputational damage
Potential cost savings at scale with a larger workforce	Difficult to scale quickly into new markets or wind down operations if needed

Setting up your own entity signals commitment and control but demands deep local expertise, steady investment, and patience to navigate complex compliance. It’s best for companies planning large-scale, long-term expansion.

What are the pros and cons of using an Employer of Record for global expansion?[toc=Pros & Cons of EOR]

More businesses now choose an Employer of Record (EOR) to simplify global hiring, reduce risk, and accelerate market entry. Based on our daily experience working with global employers, here’s a balanced view of the benefits and trade-offs when using an EOR.

Pros and Cons of using an Employer of Record
Pros	Cons
Fast market entry: Hire and onboard employees in days, not months, without entity setup.	Less direct control: Some HR and administrative decisions are handled by the EOR, not you.
Reduced compliance risk: EORs are experts in local labor laws and handle all legal, payroll, and tax obligations, giving you peace of mind.	Ongoing service fees: EORs charge monthly fees per employee, which can add up for larger teams.
Lower upfront costs: No need to invest in entity registration, office space, or local admin staff.	Dependence on a third party: Your business relies on the EOR's service quality and compliance practices.
Scalability and flexibility: Easily scale up or down as your business needs change, or exit a market without the hassle of closing a company.	Limited customization: You may have less flexibility to tailor employment contracts or benefits to your unique company culture.
Access to top talent: EORs help you offer competitive, locally compliant packages, improving your ability to attract and retain the best people.	-
Saves time and admin work: EORs handle payroll, benefits, onboarding, and HR paperwork, freeing up your team to focus on growth.	-

An Employer of Record is ideal for companies prioritizing speed, compliance, and flexibility, especially for smaller teams or new market entry. However, it requires accepting some loss of control and ongoing fees.

This balanced view reflects our expertise guiding global employers through global expansion, helping you choose the strategy that fits your business goals, size, and timeline.

When should you choose setting up your own entity?[toc= When to Choose Own Entity]

Setting up a legal entity abroad is a major move, often involving initial investments of tens of thousands of dollars and considerable time. From our experience with global employers, this option really pays off when you’re committed to establishing a lasting, credible presence.

Here’s when setting up your own entity really shines:

You’re planning to hire a significant number of employees and want to manage everything in-house, from payroll to benefits.
Your business strategy involves a long-term commitment to the market, not just a quick test or short-term project.
You want to customize employment contracts, benefits, and company policies to fit your unique culture and goals.
Building a strong local brand presence and credibility with clients, partners, or government agencies is important to you.
You have the internal resources, both time and budget, to handle the setup process, ongoing compliance, and administrative requirements, including legal fees.

In short, setting up your own entity makes sense when you’re ready to invest for the long haul and fully commit to growing your presence in a new market.

When should you choose an Employer of Record?[toc=When to Choose EOR]

Now that we’ve explored when setting up your own entity is a smart move, now let’s look at the situations where an Employer of Record (EOR) is the best fit. From our experience with global businesses, choosing an employer of record vs own entity is all about speed, compliance, and flexibility. If you need to hire international employees in days, need quick market entry, or run short-term projects without setting up a local entity, an EOR is your go-to solution.

We’ve seen companies bypass months of paperwork and legal risk by letting EORs manage payroll, taxes, and HR admin, freeing you to focus on scaling and capturing top talent. Here’s when opting for employer of record vs your own entity is the smart move:

When should you choose an Employer of Record? — Employer of Record is ideal when speed, flexibility, risk reduction, and lack of local expertise are key, letting you focus on core business while exploring new markets efficiently

Here’s when choosing an EOR service is usually the best choice:

You want to hire employees in a new country within days, not months.
Your business is exploring a market or running a pilot project and needs maximum flexibility.
You don’t have in-house expertise to manage local payroll, taxes, or local law compliance.
Reducing administrative work and legal risk is a priority for your team.
You’d rather focus on your core business than get bogged down in paperwork and regulations.

From what we’ve seen, an EOR service is the perfect partner for companies that need to move fast, stay compliant, and keep their options open as they grow internationally.

Cost Implications: A Real-World Example Comparing Employer of Record vs Own Entity[toc=Cost Implications]

Cost is often the deciding factor when choosing between an Employer of Record (EOR) and setting up your own legal entity. To give you a clear picture, let’s walk through a real example based on hiring 10 employees in India. We’ll break down every major cost component, so you see exactly what goes into each option.

Legal Entity Setup Cost in India
Cost Category	Details	Monthly (INR)	Annual (INR)	USD (Approx.)
Incorporation of a company	- Drafting of name reservation application, incorporation application and filings with the Ministry of Corporate Affairs - Procuring Director Identification Number (if required) - Drafting of Memorandum of Association and Articles of Association - Procuring PAN & TAN - Co-ordination and procuring the certificate of incorporation - Preparation of first board meeting documents - Assistance in opening bank account - Filing of Forms with Reserve Bank of India - Preparation of Form FCGPR - Issuance of CS Certificate	-	100,000	1,200
Commercial Registrations	- Professional Tax (for both employer and employee) - GST registration - Shops & Establishment registration	-	40,000	480
Total One-time Setup	-	-	140,000	1,680
Ongoing cost
Employee Salary*	For 10 employees	1,000,000	12,000,000	144,000
HR/Admin Cost	-	83,333	1,000,000	12,000
Compliance Services	Bookkeeping, Tax filings, Payroll compliances, Secretarial requirement	40,000	480,000	5,760
Audit Services	Tax Audit and Secretarial Audit	0	70,000	840
Other cost	(% of salary)	200,000	2,400,000	28,800
Total Ongoing Cost	-	1,323,333	15,950,000	191,400
Other considerations
Corporate Tax¹	(5%)	-	797,500	9,570
Retained Income of Indian Subsidiary²	(15%)	-	2,392,500	28,710
GRAND TOTAL		-	19,280,000	231,360

Corporate Tax ~ 5% = 120% of Employee Cost 17% (Profit margin as per Transfer Pricing requirements) 25% Tax on Profits

Retained Income of Indian Subsidiary ~ 15% = 120% of Employee Cost 17% (Profit margin as per Transfer Pricing requirements) 75% Tax on Profits

Setting up your own entity involves not just the administrative and compliance overhead, but also taxation on profits and retained earnings. These indirect costs can pile up quickly, especially for small or mid-sized businesses testing a new market.

Estimated Cost of Employer of Record
	Monthly (INR)	Annual (INR)	Annual (USD)
Employee Salary* (For 10 employees)	1,000,000	12,000,000	144,000
Other cost (% of salary)	200,000	2,400,000	28,800
HR/Admin Cost	Included	Included	Included
EOR Fee (% of Employee Salary)	70,000	840,000	10,080
Total	1,270,000	15,240,000	182,880

*This is an estimated cost. Actual numbers may vary based on the role and experience.

With an Employer of Record, you bypass the hassle of incorporation, statutory filings, and local tax obligations. Everything from onboarding to payroll and compliance is handled under one roof, at a predictable cost.

From this example, you can clearly see that using an Employer of Record is significantly more cost-effective, saving you nearly $50,000 annually when compared to establishing your own legal entity. Beyond the numbers, the Employer of Record (EOR) model also offers faster market entry, lower risk exposure, and minimal administrative burden, making it ideal for companies looking to scale globally without the long-term commitment or overhead.

How do you decide between legal entity setup and an Employer of Record (EOR)? [toc=Decision-Making Framework]

Deciding between setting up your own entity and using an Employer of Record (EOR) doesn’t have to be daunting. Through years advising on global hiring strategies, we know the right path, EOR or entity, relies on your own pace of growth, readiness to manage legal hurdles, and what you can dedicate to scaling up internationally.

Here’s our proven decision-making framework, designed to help you make a confident call:

How quickly do you need to hire?
If you need to onboard employees in days or weeks, go with an EOR. If you have months to spare and want to build a long-term base, consider your own entity.
What’s your commitment to the market?
For short-term projects or testing a market, EOR is best. For a permanent, large-scale presence, setting up an entity is the way to go.
How many employees are you planning to hire?
EOR is ideal for small to medium teams or when you’re not sure about headcount. If you’re hiring a large team and plan to grow steadily, an entity setup may be more cost-effective in the long run.
How much control do you need over HR, payroll, and policies?
If you want full control over every detail, including customizing benefits and policies, choose your legal entity. If you’re comfortable with a trusted partner handling these, EOR will save you time and effort.
How complex are the local compliance and labor laws?
If you don’t have in-house expertise on local laws and want to avoid compliance headaches, EOR takes that off your plate. If you have a legal and HR team ready to manage employ regulations, an entity may work.
What’s your risk tolerance for compliance and legal exposure?
EOR reduces your risk by taking on legal employer responsibilities, but you should still vet their compliance practices. If you’re ready to take on all compliance and legal risks yourself, entity setup gives you that responsibility.
Are you planning multi-country expansion?
If you want to hire in several countries at once, EOR streamlines everything, no need to juggle multiple entity registrations. If you’re focused on one country for now, an entity could make sense.
Do you have the resources (time, money, people) for ongoing admin and reporting?
EOR keeps things lean and simple. Entity setup requires ongoing investment in admin, payroll, compliance, and annual reporting.

If you’re still unsure after mapping your answers, Reach out us. Our team of EOR and HR experts can help you navigate your unique situation and choose the most effective, compliant path for your international expansion.

What should you look for before partnering with an EOR service or setting up your Own legal entity? [toc=Key Factors to Consider]

Choosing the right path for your global expansion, whether partnering with an Employer of Record (EOR) or setting up your own legal entity, comes down to more than just speed or cost. Over the years, we’ve seen that the best decisions are made when you look closely at a few critical factors that directly impact your business, your people, and your long-term goals.

Here’s what you should always consider:

Local Expertise and Compliance:

Make sure your EOR partner (or your own team, if setting up an entity) has deep knowledge of local labor laws, tax regulations, and compliance requirements in your target country. This reduces your risk of costly mistakes and legal issues.

Transparency and Pricing:

Look for clear, upfront pricing with no hidden fees. Whether you’re evaluating an EOR or entity setup, ask for a detailed cost breakdown so you know exactly what you’re paying for.

Service Range and Flexibility:

Check that your EOR offers the services you need, such as payroll, benefits, onboarding, and even visa support, and can adapt to your changing business requirements. For your own entity, make sure you have the resources to cover all HR and admin needs.

Geographical Coverage and Network:

Confirm your EOR has a strong presence (ideally their own legal entities) in the countries where you plan to hire, or that your entity setup will support your current and future expansion goals.

Reputation and Track Record:

Research the EOR’s reputation, client reviews, and years in business. A provider with a strong track record and positive feedback from similar companies is more likely to deliver a smooth, compliant experience.

Taking these factors into account will help you choose the right partner or structure for your global hiring, setting you up for smooth, compliant, and scalable international growth.

When and how should you transition from an EOR to your own legal entity?[toc=Transition from EOR to Entity]

Thinking about moving from an Employer of Record (EOR) to your own legal entity? Here’s what we’ve learned from guiding businesses through this transition, broken down into straightforward steps and signals:

Watch for growth triggers: If your team in a country is growing fast, your headcount is rising, or you’re committed to a long-term presence, it’s a strong sign you should consider your own entity.
Calculate your cost tipping point: As your team expands, ongoing EOR fees may start to outweigh the initial setup and admin costs of an owned entity. Review your cost structure regularly, like in the example above, the numbers can make the case clear.
Plan your timing: Don’t rush. Start the entity setup process while still using the EOR, so you don’t lose hiring momentum or risk compliance gaps.
Get your groundwork right: Register your entity, secure all required licenses, set up local payroll, open a bank account, and make sure you’re ready for local tax and compliance filings.
Coordinate the employee transition: Work closely with your EOR to transfer contracts, benefits, and payroll smoothly to your new entity. Clear, early communication with your team is key to keeping morale high.
Lean on local experts: Engage local legal, HR, and tax advisors to avoid pitfalls and ensure a seamless transition.
Celebrate the milestone: Moving to your own legal entity is a big step in your global journey, embrace the new control and opportunities it brings!

From our experience, a well-planned transition keeps your business compliant, your employees happy, and your growth on track.

Why Trust Wisemonk as Your EOR Partner for Global Expansion?[toc=How Wisemonk Helps]

Wisemonk is an Employer of Record (EOR) trusted by global businesses to manage international workforce needs, especially for companies looking to hire, pay, and manage employees in India. We are recognized for our deep local expertise, transparent pricing, and comprehensive EOR services designed to make your expansion into India smooth, compliant, and cost-effective.

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Why Trust Wisemonk as Your EOR Partner for Global Expansion? — Wisemonk's end-to-end support covering recruitment, payroll, benefits, onboarding, ongoing HR assistance, plus complete equipment procurement and office setup to ensure your team is ready from day one

Our end-to-end EOR services in India include:

Recruitment and background checks, ensuring you hire top talent
Payroll management for both full-time employees and contractors
Benefits administration tailored to Indian market standards
Seamless employee onboarding and offboarding
Equipment procurement, office setup assistance, and ongoing HR support

While India is our core strength, we understand that many businesses have global ambitions. That’s why we also support clients expanding into key markets like the United Kingdom, the United States and beyond. With Wisemonk, you get a reliable partner for your India operations and your broader global hiring journey.

Ready to build your world-class team in India, or need guidance for hiring internationally? Connect with Wisemonk and let’s make your global expansion effortless.

FAQs[toc=FAQs]

Who is considered an independent contractor?

An independent contractor is an individual who provides services with autonomy and flexibility, is hired on a project basis, and is responsible for their own taxes and benefits. Learn more: Who is an Independent Contractor?

What is a Professional Employer Organization (PEO)?

A Professional Employer Organization (PEO) is a third-party service provider that helps companies manage HR functions, such as payroll, benefits, and compliance. Discover more: What is a PEO?

What’s the difference between an EOR and a PEO?

A PEO is a co-employer that supports HR functions while you remain the legal employer. An EOR is the legal employer and assumes full responsibility for compliance and payroll. For a detailed comparison, refer to "PEO vs EOR: What is the correct strategy for your organization?"

What should be included in an employee onboarding checklist for hiring in India?

An employee onboarding checklist for hiring in India should cover essential steps like documentation, orientation, training, and compliance with local labor laws. Get the details: Employee Onboarding Checklist 2024: Hire in India.

What is the difference between contractors and employees ?

The main differences between contractors and employees lie in the nature of the working relationship, tax implications, and legal obligations for both parties. Learn more: Know the Difference Between Contractors vs Employees in 2025.

Can I switch from an EOR to my own legal entity later?

Yes, many global companies start with an EOR for speed and flexibility, then transition to their own legal entity when they’re ready for long-term growth and full control.

What are the costs of employment in India?

The costs of employment in India include salaries, benefits, taxes, and compliance costs, which can vary based on factors like industry, location, and company size. Discover more: Cost of Employment in India 2025.