Hiring in the USA When You're a Non-Resident-Owned Company

Your first US hire is a milestone: a salesperson close to your customers, a support lead in the right time zone, or a manager to run US operations. It is also the point where your company's US tax and compliance picture changes most. This guide explains the options and what to set up before anyone starts work.

Contractors or employees?

The first decision is whether the person will be an independent contractor or an employee. The label in the contract is not what decides it; the actual working relationship does.

Misclassifying employees as contractors can lead to back taxes, penalties and claims under federal and state employment law. Some states apply stricter tests than federal rules.

For contractors, see 1099 thresholds.

Hiring employees: what changes

Payroll taxes

As an employer, your company must:

• withhold federal income tax from wages,
• withhold and pay Social Security and Medicare taxes (the employer pays a matching share),
• pay federal unemployment tax, and
• handle state income tax withholding and state unemployment insurance in the employee's state.

Payroll returns are filed quarterly and annually, and employees receive a Form W-2 each year. Most companies use a payroll provider to calculate, file and pay automatically.

State registration

If your employee works in a state other than your formation state, your company usually has to register to do business in that state and register for its payroll taxes. See state taxes for foreign-owned companies.

Employment eligibility

Employers must verify that each employee is authorised to work in the USA using Form I-9, and some states or contracts require E-Verify.

Employment law and benefits

Minimum wage, overtime, paid leave rules, workers' compensation insurance and anti-discrimination law apply, and vary by state. Health insurance is expected for many roles. See business insurance.

The tax effect on your company

Hiring a US employee can create a US trade or business. For a foreign-owned LLC, that can make some or all of its income effectively connected with the USA, and therefore taxable in the USA, with personal US filings for the owners. For partnerships, foreign-partner withholding may start. Many founders convert to, or form, a C-Corporation at this stage. See effectively connected income and LLC or Inc.

Employer of record (EOR): hiring without the setup

An employer of record is a company that legally employs your US worker on your behalf: it runs payroll, handles taxes and benefits and complies with state law, while the person works for you day to day. It is a fast way to test a US hire without registering in a new state. It costs more per employee, and it does not automatically remove the tax questions about your own company's US activity.

Can I hire myself?

Owning a US company does not give you the right to work in the USA. To be employed by your own US company in the USA, you need an appropriate visa. See US business visas.

Before the first hire: a checklist

1. Decide contractor or employee, based on the real relationship.
2. Review your entity type and US tax position.
3. Register in the employee's state if needed.
4. Set up payroll and payroll tax accounts.
5. Arrange workers' compensation and other required insurance.
6. Prepare an offer letter or contract, and complete Form I-9.
7. Update your bank and payroll processes.

How UCB helps

We review how a US hire affects your company's structure and tax position, register your company in additional states, and keep your federal filings correct. For payroll and employment law, we work alongside payroll providers and employment counsel.

Planning your first US hire? WhatsApp us at +91 8105 199 399 or email info@ucbsolutions.com before you make the offer.