US tax for an owner abroad · A term for founders abroad
What is an employer of record?
A company that legally employs staff on another's behalf, handling payroll and compliance, so a foreign-owned company can have a US employee.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 31 of 105 in the glossary, filed under E.Every term, A to Z
Employer of record, for a founder abroad.
Hiring a US employee directly means registering for payroll taxes with the IRS and the state, following employment law, buying workers' compensation insurance, and taking on a US presence that can bring US income tax.
An employer of record employs the person for you, bills the company monthly and handles the compliance. It's how most foreign-owned companies hire their first US staff, until they're ready to be a US employer themselves.
Read next · guide · 3 minHiring US contractors from abroad: the W-9, the 1099-NEC, and the line you must not crossWhat founders ask next.
- Can my foreign-owned LLC hire a US employee directly?
- Yes, but it then runs US payroll and may have a US trade or business. An employer of record avoids both while you test the hire.
- Employer of record or contractor?
- A contractor if the person genuinely sets their own hours and methods. If you direct their work like an employee's, use an employer of record.
03 · See also
- US tax for an owner abroadIndependent contractorSomeone who provides services on their own terms rather than as an employee; paid without payroll, and reported on Form 1099-NEC if in the US.Read the term
- US tax for an owner abroadUS trade or businessRegular, continuous business activity in the US that makes a foreign person's connected income taxable there; decided by facts, not where you formed.Read the term
- US tax for an owner abroadDisregarded entityA single-member LLC the IRS ignores for income tax, treating its income as the owner's; it still files Form 5472 if the owner is foreign.Read the term
- US tax for an owner abroadPass-through taxationTax treatment where a company pays no income tax itself and its profit is taxed to its owners, as with an LLC or a partnership.Read the term
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