US Expansion: Incorporation vs. Local EOR/AOR

UK Recruitment Agencies in the US: Incorporation vs. Local EOR/AOR

Expanding operations to the United States is a strategic move for UK recruitment agencies eyeing the vast talent pool and opportunities that lie across the pond. However, the decision-making process involves crucial considerations, especially regarding the business structure and operational setup of the agency. In this blog we will explore the pros and cons of incorporating and establishing an office, versus utilising a local Employer of Record (EOR) or Agent of Record (AOR) when expanding to the US.

Incorporating and Establishing an Office in the US

What are the advantages of incorporating?

1. Direct Control: Incorporating gives your UK recruitment agency direct control over operations, allowing you to implement processes and strategies tailored to your business model.

2. Risk Management: Setup in the correct way, having a US entity will offer greater protection to your UK business, ensuring any litigation is contained within the US.

3. Enhanced Brand Presence: Having a physical office in the US can enhance your agency’s brand presence and credibility. It signals a commitment to the local market.

4. Direct Client Interaction: Establishing an office facilitates direct interaction with US clients, fostering stronger relationships and greater understanding of their specific needs.

What are the disadvantages to incorporating?

1. Complexity and Cost: Setting up and maintaining an office involves legal complexities, compliance issues, and significant upfront and ongoing costs.

2. Timescales: The process of incorporation, obtaining necessary licenses, and setting up infrastructure can be time-consuming, which will delay entry into the US market.

3. Employment Responsibilities: As an employer, you will be responsible for HR functions, compliance with US employment laws, and navigating the complexities of tax regulations.

Using a Local EOR/AOR

The Advantages

1. Speed to Market: Partnering with a local EOR/AOR enables swift entry into the US market, allowing your agency to start operations without the delays associated with incorporation.

2. Cost-Effective: Utilising a local EOR/AOR is often more cost-effective, as you avoid the significant upfront costs and ongoing expenses associated with establishing and maintaining an office.

3. Compliance: EOR/AOR providers are well-versed in US employment laws and regulations, ensuring that your agency remains compliant and avoids legal pitfalls.

The Disadvantages

1. Limited Control: Relying on a local EOR/AOR means relinquishing some control over day-to-day operations, as certain HR functions are managed by the service provider.

2. Local Recognition: Your agency may face challenges in building a strong local brand presence compared to having a physical office.

3. Indirect Client Interaction: While EOR/AOR providers handle employment logistics, direct client interaction may be limited, potentially impacting the depth of client relationships.

Assessing What’s Right for Your Agency

Short-Term vs. Long-Term Goals

Assess whether your expansion is a short-term project or a long-term commitment. If testing the market, a local EOR/AOR may offer flexibility. For long-term goals, incorporation may be more strategic.

Evaluate Financial Resources

Consider your budget constraints. Incorporation involves substantial upfront costs, whereas partnering with an EOR/AOR offers a more cost-effective entry point.

Risk Management

Evaluate your agency’s risk tolerance. Incorporating provides more control but comes with higher risks and responsibilities, especially in terms of legal and compliance matters.

Client Expectations

Consider the expectations of your clients. If direct client interaction is crucial, establishing an office might be more aligned with client expectations.

Navigating your Agency’s Expansion

The decision between incorporating and establishing an office or using a local EOR/AOR for UK recruitment agencies expanding to the US depends on a multitude of factors. Assessing your agency’s goals, resources, risk tolerance, and client dynamics will guide you in making the most strategic and practical choice for a successful entry into the US recruitment market. Whether choosing the path of independence or leveraging the support of a local partner, a well-informed decision will set the foundation for a thriving presence in the US.

We can help

As an APSCO Trusted Partner, WTT Legal is well placed to advise on transacting business in the US and using your UK entity to engage with US clients.

Are you a recruitment agency considering your US expansion plans? Get in touch to arrange a free legal consultation with our specialist advisors. Email us at info@wttlegal.co.uk or call us on +44 (0)20 3468 0000 for more information.