International Entity vs EOR: How to Choose the Right Structure for Each Market

The entity vs EOR decision is one of the most consequential choices in international expansion. The right answer depends on the number of employees planned, the country in question, the speed requirements, and the company's risk and administrative tolerance. This guide provides a decision framework.

The Core Tradeoff

EOR: faster to deploy (2–4 weeks vs 6–16 weeks for entity), no upfront legal cost, no ongoing entity compliance burden, but more expensive per employee (15–25% EOR fee) and less operational control. Own entity: higher upfront and ongoing cost, longer setup time, more compliance obligations, but eliminates EOR fees at scale, provides more control, and enables local operations (local bank account, local contracts, local IP ownership) that EOR cannot provide.

The Decision Framework by Employee Count

• 1–5 employees in a new country: EOR is almost always the right choice — entity setup cost and complexity not justified
• 5–10 employees: EOR typically still preferable unless entity establishment is unusually fast and cheap (e.g., Canada, UK)
• 10–20 employees: the economics start to favor entity; build a quantitative comparison specific to the country and EOR pricing
• 20+ employees: own entity is usually more cost-effective if you plan to maintain this headcount for 2+ years
• Any number in a country where you need local bank accounts, local contracts, or local IP: entity is required regardless of headcount

Country-by-Country EOR vs Entity Analysis

India

• EOR fee range: 15–22% of gross salary
• Entity setup cost: $8,000–$25,000
• Entity annual maintenance cost: $8,000–$18,000
• Break-even headcount (EOR fee vs entity cost): approximately 15–20 employees
• Entity setup timeline: 6–10 weeks
• Complexity: medium-high (multiple registrations, RBI filings, annual audit requirement)
• Recommendation: EOR for first 15 employees; evaluate entity at 15–20 employees

United Kingdom

• EOR fee range: 12–18% of gross salary
• Entity setup cost: $3,000–$8,000
• Entity annual maintenance cost: $4,000–$8,000
• Break-even headcount: approximately 8–12 employees
• Entity setup timeline: 2–4 weeks (one of the fastest globally)
• Complexity: low (Companies House registration is straightforward)
• Recommendation: entity earlier than other markets given low setup complexity and fast timeline

Canada

• EOR fee range: 10–15% of gross salary
• Entity setup cost: $3,000–$6,000
• Break-even headcount: approximately 6–10 employees
• Entity setup timeline: 2–3 weeks (federal corporation or provincial registration)
• Complexity: very low
• Recommendation: entity at 8–10 employees given speed and simplicity

Germany

• EOR fee range: 18–25% of gross salary
• Entity setup cost: $15,000–$40,000 (GmbH requires €25,000 minimum capital)
• Entity annual maintenance: $12,000–$25,000
• Break-even headcount: approximately 20–30 employees
• Entity setup timeline: 8–16 weeks
• Complexity: high (notarized articles of association, banking relationship required for capital deposit, works council requirements at 5+ employees)
• Recommendation: EOR until 20+ employees; entity only if Germany is a strategic long-term market

Transition: Moving from EOR to Own Entity

The transition from EOR to own entity requires: new employment contracts under the entity (employees must consent to the change of employer), transfer of employment history for statutory purposes (gratuity calculation in India continues from original start date), migration of payroll data, and potentially a brief overlap period where both the EOR and entity are active. Plan 60–90 days for the transition process and ensure employees are communicated with transparently — the change of employer, even within the same company, can create anxiety.