Hiring in the US as a Foreign-Owned LLC: Three Routes

Cheapest and fastest, and the risk is misclassification: if the relationship looks like employment, calling it a contract does not make it one, and the exposure sits with you as payer.

If the working relationship looks like employment, calling it a contract does not make it one. Tests exist at both federal and state level, states apply their own, and some are notably strict.

The exposure sits on the payer: back taxes, unpaid withholding, penalties, and in some states benefits and interest. It surfaces years later, often when the person files for unemployment or workers' compensation and an agency asks how they were engaged.

The IRS test is common law, and it weighs three categories of evidence rather than applying a formula:

Behavioral Control: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial Control: Are the business aspects of the worker's job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship: Are there written contracts or employee type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

No factor is decisive and the IRS publishes no scoring rule. Form SS-8 exists for when you cannot tell. States apply their own tests, several of them stricter than the federal one, and we have not verified those state by state.

The consequence, in the IRS's words: "If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker." We looked for a published dollar penalty and there is not one.

The forms side of engaging contractors is covered separately, and collecting the right one before the first payment is a distinct obligation from getting the classification right.

You become a US employer, which means registering with the state, running payroll with withholding and employer taxes, carrying workers' compensation, and complying with that state's employment law.

Doing all of that from another time zone, in a country whose employment rules you do not know, for one or two people, is the part founders underestimate. It is not conceptually hard. It is a permanent administrative commitment.

The EOR employs the person and assigns them to you. They hold the registration, run the payroll, carry the insurance and take the employment law risk.

You pay a premium per head, and you get compliance in a jurisdiction you do not know without setting anything up. For one to three people in the US, this is frequently the rational answer for a founder abroad, and it is the route most likely to be dismissed on price by someone who has not priced the alternative properly.

If you take the direct employee route, this is the obligation set. All of it is federal and none of it is optional.

The four forms, and when each is due

The I-9 rule in USCIS's own words, because the three-day window catches people:

Within three business days of the date employment begins, you or your authorized representative must complete Section 2 by examining original, acceptable, and unexpired documentation

The payroll tax rates for 2026, from IRS Publication 15:

For 2026 the Social Security tax is 6.2% each for employer and employee on wages up to a $184,500 wage base, and Medicare is 1.45% each with no wage base limit.[1]Internal Revenue Service, Publication 15 (2026)

An extra 0.9% Additional Medicare Tax is withheld from wages above $200,000 in a calendar year, and it is imposed on the employee only with no employer share.[2]Internal Revenue Service, Publication 15 (2026)

FUTA is smaller than it looks, if you pay your state:

FUTA is 6.0% on the first $7,000 of each employee's wages, reduced to 0.6% where the employer qualifies for the full 5.4% state credit.[3]Internal Revenue Service, Topic no. 759

The number that frightens people is the one before the credit; the number you pay is the one after it.

So your employer-side floor is the combined Social Security and Medicare rate above, plus the net FUTA figure, plus state unemployment insurance, plus workers' compensation where the state requires it. It is the state layer that varies, and it is the layer nobody quotes you.

E-Verify is voluntary. Federally, and this surprises people:

E-Verify is a voluntary program.

Three exceptions: federal contractors with the FAR E-Verify clause, employers in states whose own law requires it, and employers under a court order.

Registration is a state obligation, and the deadlines are short and unalike.

Texas states its own rule plainly: "Texas Unemployment Compensation Act requires Texas requires an employer paying wages to register with the Texas Workforce Commission within ten days of becoming liable under the Texas Unemployment Compensation Act.[4]Texas Workforce Commission

Wyoming's rule catches out-of-state employers specifically: "If a business performs work in Wyoming, or hires a Wyoming resident, it must register with the Wyoming Department of Workforce Services (DWS)." And registration is required even when you turn out not to owe anything: "Even if a business may be non-liable or optional under Wyoming's Workers' Compensation fund, registration is still required so DWS can make that determination."

California requires an employer to register with the EDD within 15 days of paying more than $100 in wages in a calendar quarter.[5]California Employment Development Department

Delaware is the one that makes you register twice. Delaware and California are the two of these five that withhold state income tax, but California's EDD account covers unemployment insurance and withholding together. Delaware splits them across two agencies: "Delaware Law requires that every employer register with the Delaware Division of Revenue," on top of the UC-1 with the Division of Unemployment Insurance.

Delaware requires an employer to submit Form UC-1 no later than 20 days after the first day of business.[6]Delaware Department of Labor, Division of Unemployment Insurance

This is state law, not federal. The Department of Labor's own framing sends you to the state: injured workers "should contact their state workers' compensation board."

Texas's Department of Insurance says it outright:

In Texas, private employers can choose to carry workers' compensation insurance coverage, but it is not required in most cases.

Non-subscribing is not free, though. Texas employers who opt out must report that they have no coverage, and must report work-related injuries causing more than one day of lost time, plus all work-related illnesses and deaths.

Florida has a trap the others do not. It counts LLC members in the employee count: coverage is required for "one or more employees, including the owner of the business who are corporate officers or Limited Liability Company (LLC) members" in construction. A single-member construction LLC in Florida hits the threshold on its own, with no employees at all.

Florida also states, in its own coverage brochure, that remote workers count:

Non-construction industry employers with four or more full-time or part-time employees, regardless whether the employee(s) is working at the employer's physical location or remotely, must provide coverage for all employees.

And it puts a duty on out-of-state employers that most people never see: "An out-of-state employer engaged in work in Florida must immediately notify his or her insurance carrier that it has employees working in Florida."

Texas non-subscribers are not off the hook. Opting out is a status with its own paperwork. Employers without coverage must post a notice of no coverage in the workplace in English, Spanish and any other language needed, give written notice to every new employee, and file a notice of no coverage with the Division of Workers' Compensation between February 1 and April 30 each year, after hiring the first employee, and on ending a policy. Employers with five or more employees must also report work-related injuries causing more than a day of lost time.

This is the question a single-member LLC owner with no employees actually has, and the answers do not rhyme.

Wyoming: exempt unless you elect in. Its wage-reporting table is explicit, "Members of a Limited Liability Company | Exempt unless optional coverage is elected," and the statute agrees at Wyo. Stat. 27-14-102(a)(vii)(P): "A member of a limited liability company unless coverage is elected." Electing takes a written Affidavit of Coverage. If you do not elect, do not report your own wages.

Delaware: covered by default, exemptible by written agreement. Executive officers are inside the chapter, and 19 Del. C. 2308(a) allows "as many as 8 individuals who are members of a limited liability company" to be exempted "if the limited liability company and the exempted members agree in writing to such an exemption." Note where that rule lives: in the Delaware Code, not on the agency's website. Delaware's workers' compensation pages never mention LLC members at all.

Florida: exemptible, with different rules by industry. A non-construction LLC member needs a minimum ownership stake, no more than ten members may elect out, and there is no fee. Construction is tighter: no more than three, and a filing fee applies.

California: not published. We searched the Department of Industrial Relations employer FAQ in full. The phrase "limited liability company" does not appear on it. California addresses sole proprietors and corporate officers and stops there. We are not going to infer the LLC answer from the sole-proprietor rule, because the corporate-officer rule next to it works differently.

One California carve-out is worth knowing because it breaks the pattern entirely: "if you are a roofer and don't have any employees, you are still required to carry workers' compensation insurance."

Texas: moot. There is no mandate to be exempted from.

Only Texas answers this squarely among the states we checked, and its answer is yes:

a foreign entity is transacting business in Texas if it has an office or an employee in Texas or is otherwise pursuing one of its purposes in Texas.

California, Delaware and Wyoming all publish the same shape of non-answer. Each gives a list of activities that do not constitute doing business, and an in-state employee appears on none of them, in either direction. California's list at Corp. Code 17708.03(b) mentions employees exactly once, and only in the context of soliciting orders. Delaware's at 6 Del. C. 18-912 does the same. Wyoming's does the same.

California's Secretary of State then declines to apply its own definition:

The Secretary of State's office cannot advise you as to whether or not the business must qualify/register to do business in California.

California's tax authority does give a number, and it is the one that will catch you. The Franchise Tax Board treats you as doing business if California payroll exceeds a threshold or 25% of total payroll, whichever is lower. For 2025 the payroll The California Franchise Tax Board treats a business as doing business in California when its California payroll exceeds a threshold amount or 25% of total payroll, whichever is lower; the 2025 payroll figure was $75,707.[7]California Franchise Tax Board

Read the second half of that test: a small LLC whose only US employee lives in California crosses the payroll share immediately, whatever they are paid. One employee can be the whole of your payroll.

Texas is also blunt about what happens if you get this wrong. An unregistered foreign entity "cannot maintain an action, suit, or proceeding in a Texas court until it registers," faces a civil penalty equal to all the fees and taxes it would have owed, and after ninety days a late filing fee on top.

Washington answers it too, and answers the opposite way. Its statute lists, among activities that do not constitute doing business:

Employing a remote worker who resides in Washington state.

That clause is a 2026 amendment, and it is the only one of its kind we found. But read the subsection four below it before relaxing:

This section does not apply in determining the contacts or activities that may subject a foreign entity to service of process, taxation, or regulation under law of this state other than this chapter.

So Washington exempts you from registering with the Secretary of State and pointedly does not exempt you from tax. Its Department of Revenue lists "Having an employee working in the state" first among activities creating physical presence nexus. The same employee is invisible to one Washington agency and decisive to another.

Colorado is the most honest of the lot, and the least helpful. Its Secretary of State FAQ asks your exact question and declines it:

Q3. I have an employee who's working remotely in Colorado, do they need to file a SOFEA? A3. Refer to section 7-90-801, C.R.S. to determine if a foreign entity is required to obtain authority to transact business in Colorado. Other agencies may require you to register with us. Your business is unique. We do not know every situation your business is facing and cannot answer legal-based questions.

The statute it points you to has no employee item in its list. So the state has published the question, published a pointer, and the pointer does not answer it.

Colorado's tax side, by contrast, is unambiguous and catches every foreign-owned LLC:

Any employer who either transacts business in Colorado or derives any income from Colorado sources is subject to Colorado wage withholding requirements, regardless of whether the employer maintains a permanent place of business in Colorado.

The pattern across all six states we read is the same. The tax and payroll question is answered clearly everywhere. The foreign-qualification question is answered by exactly two states, in opposite directions, and refused by the rest. Budget for the payroll registration; treat the qualification question as one for counsel in that specific state.

So the honest answer is split. Hiring an employee in a state reliably triggers payroll registration there, which sections above verify. Whether it additionally triggers foreign qualification with that state's Secretary of State is stated only by Texas. We are not going to turn one state's rule into a national one.

Hiring someone in a state is also a state tax event.

Every LLC doing business in California or organized in California owes an $800 annual tax, and it keeps falling due even in a year with no trading, until the LLC is cancelled.[8]California Franchise Tax Board, Limited liability company

A California-based person working for you is the classic way a Wyoming LLC acquires California obligations. Employment guides discuss employment. Tax guides discuss nexus. The decision is one decision and it should be made with both in view.

Whether a given engagement creates nexus depends on the arrangement and on the state. An EOR arrangement, where the EOR is the employer, may sit differently from direct employment. We have not verified how any specific state treats an EOR arrangement for nexus purposes, and that is a question worth asking before signing rather than after.

State-level worker classification tests, which differ from the federal one and are stricter in several states. How any state treats an employer-of-record arrangement for nexus purposes. Whether hiring an in-state employee triggers foreign qualification anywhere other than Texas. State unemployment insurance rates, which are experience-rated and therefore specific to you. Workers' compensation premiums, which are priced by carrier and class code rather than published by the state.

Five gaps, all narrower than they were, and none of them is a number we could have found and skipped.

Can my foreign-owned LLC hire US employees? Yes. There is no rule preventing it. The obligations that follow are the reason most founders at small scale use an EOR instead.

Is it easier to just use contractors? Easier and riskier. Misclassification exposure sits with the payer and surfaces years later. The label in the agreement does not decide the question.

Will hiring in California cost me the annual tax? A California-based worker is the classic nexus trigger. Whether your specific arrangement creates it depends on the facts and is worth asking about before you hire.

What does an EOR cost? More per head than direct employment on paper. Whether it is more in total depends on what registering and running payroll in that state actually costs you, and most founders never price that side.

Do I need workers' compensation? Generally yes for employees, in most states. Not applicable to genuine contractors, which is part of why the classification question matters so much.