If you own a US LLC from outside the country, you can still hire people in the United States. Contractors are simpler to set up, while employees bring more paperwork and a bigger tax question you need to understand first.
Contractors versus employees, the quick view
Before you hire anyone, decide which category fits the work. The IRS looks at control and independence, not just the title you give someone.
| Factor | Contractor | Employee |
|---|---|---|
| Who sets the schedule | The worker | The company |
| Tools and equipment | Usually the worker's own | Often provided by the company |
| Tax withholding | None, worker pays their own taxes | Company withholds federal and state taxes |
| Paperwork at hire | Form W-9 | State new hire registration, W-4 |
| Yearly tax form | Form 1099-NEC if paid above the threshold | Form W-2 |
| Workers compensation | Not required | Usually required |
If you misclassify an employee as a contractor, you can end up owing back withholding and penalties. When in doubt, get a professional opinion before you start paying someone.
Hiring contractors
Contractors are the easier path for a foreign-owned LLC, especially early on.
Collect a Form W-9. Before you pay a US contractor anything, ask them to fill out Form W-9. This gives you their legal name, address, and taxpayer identification number. Keep it on file, you do not send it to the IRS, but you need it to prepare year-end forms correctly.
Pay by ACH where you can. ACH transfer is the standard way to pay US contractors. It is traceable, cheap, and easy to reconcile against your bookkeeping. Many founders connect a US bank account through Mercury, Wise Business, or Relay and pay contractors directly from there.
File Form 1099-NEC at the yearly threshold. If you pay a US contractor above the yearly threshold set by the IRS, you must file Form 1099-NEC for that contractor after year end and send them a copy. The exact threshold can change, so check the IRS site each year before you file. Missing this form is a common way small companies get flagged, even when no tax was actually owed.
Keep records year round. Do not wait until January to figure out who you paid and how much. Good bookkeeping through the year makes 1099 season a five-minute task instead of a scramble.
Hiring employees
Employees are a bigger commitment, and the setup work happens before the first paycheck goes out.
Register for payroll with the state. Before you can legally pay a W-2 employee, you generally need to register your LLC with the state's labor and tax agencies. This is separate from your LLC formation and separate from your federal EIN. Requirements vary by state, so check the specific state's site for its payroll registration process.
Set up withholding. As an employer, you withhold federal income tax, and usually state income tax, from each paycheck. You also handle the employer side of federal payroll taxes. This is ongoing, not a one-time task, and mistakes here are expensive to unwind later.
Get workers compensation coverage. Most states require employers to carry workers compensation insurance once they have employees, even just one. Rules on exactly when this kicks in vary by state, so check the state's site or ask a professional before you make your first hire.
File payroll tax returns. Employers file periodic payroll tax returns at the federal level and often at the state level too. These are due on a regular schedule, not just once a year, so this is not a task you can leave until tax season.
Why most foreign-owned LLCs use a payroll provider or employer of record
Running US payroll correctly, as a founder based outside the country, is genuinely hard to do alone. You are dealing with state registration, ongoing withholding calculations, workers compensation rules, and payroll tax filings, all for a jurisdiction where you may have no local presence.
Two common solutions:
- A payroll provider handles the calculations, filings, and payments for you, while your LLC remains the legal employer.
- An employer of record (EOR) becomes the legal employer on paper, handling payroll, benefits, and compliance, while the worker still does the same job for your business.
Most foreign-owned LLCs choose one of these instead of building payroll in-house, at least until they have enough US employees to justify the overhead. PowerLaunch does not run payroll for you directly, but your MyCG.AI bookkeeping stays connected to whatever provider you use, so your books stay accurate either way.
The trade or business question
This is the part founders miss most often. Having US employees, as opposed to contractors, can cause your LLC to become "engaged in a US trade or business" for tax purposes. That status can change how your company is taxed at the federal level and may bring in additional filing obligations beyond the standard Form 5472 and pro forma Form 1120 that a foreign-owned single-member LLC already files.
This does not mean you should avoid hiring US employees. It means you should get a professional review before you do, so you know what it changes for your tax filings. This is exactly the kind of question a licensed tax professional consultation is built for, and it is included with the Run and Scale plans.
Contractor relationships generally do not create this issue on their own, which is one more reason many foreign founders start there and only move to employees once the business has grown enough to need them.
What to do next
If you are still deciding between contractors and employees, or you want to understand what hiring US staff would mean for your tax filings, book the free 20-minute consultation at powerlaunch.solutions/book. If you are ready to get your LLC set up properly before you hire anyone, go to powerlaunch.solutions/signup and choose the Run or Scale plan, both include a licensed tax professional consultation and ongoing bookkeeping that will make payroll, whichever way you run it, much easier to track.
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