My question is as simple as that. The answer is probably just a plain “No” but maybe someone has been in my shoes before.
I started as a digital nomad while freelancing and unexpectedly, it’s going really well. So I hired many freelancers who are helping me out but most freelancers are not very reliable and busy themselves with other projects.
So I was wondering if I could employ someone from Europe with my US LLC while remaining tax free as a digital nomad? Or what’s the best way to set up a business with which I can do that? I would employ someone for part time only to test it out, e.g. for 6 months.
PS: Yes, I already contacted a super expensive consultant but just wanted to ask here if someone has had experience with that.
Thank you
Since when DN is tax free
No. If you hire someone as an employee, you’ll have to pay social security contribution for them and most likely will be regarded as having a subsidiary in that country.
It kind of sounds like you want the best of both worlds (reliability of an employee, but the flexibility of a freelancer). The only option I see is to go through an agency or a regular company.
Can you even give the freelancer enough work to drop all other clients? But keep in mind that in many EU countries, there is something like false employment (when a freelancer only has one client) that can get you in trouble as the employer as well.
PS: save the money for the super expensive consultant.
You want a contractor, not an employee. You need to familiarize yourself with local laws with wherever you source talent.
Probably yes through an employer of record. You’ll pay their invoice and they take care of the employment and all that comes with it.
Interesting but sounds too good to be true. What’s the catch?
The catch is extra cost. With an EOR, the employee works for them, not for you. The EOR pays their salary, handles tax witholding, potentially provides benefits (which they’ll charge you for), etc. For you it’s just a B2B relationship where you are contracting them for services, and they invoice you an amount. They use the money from that invoice to make their profit and pay the employee. Usually the invoice amount will just be the salary that the employee should be paid, plus their fee, plus cost of any benefits that they can provide that you want the employee to get.
You won’t owe any taxes from your business income since you aren’t employing people or doing business in that country, but the employee will likely still owe taxes. This will be handled by the EOR, but you’d still need to factor that into your salary offer to calculate what the actual take home will be so the offer is competitive.
I’ve been in similar positions but not through an EOR. I used to work for a software consultancy and I ended up contracted out to a single client for the entire time. I effectively just worked for them, but I was still employed by and paid by my company.
As a full time employee, no. As a contractor, yes, you can pay them directly yourself and not through the LLC even if you want. And that’s what you are going to do either way, as a US LLC you can’t hire an European resident as FTE, since they are not US residents.
Alternatively, you can incorporate in the relevant European country, hire the person as FTE, and just inject capital there that has already paid taxes wherever its relevant, but it’s going to be a lot of accounting and regulatory annoyances.
The best “mixed” option is probably to hire through an employer of record if you can afford it.
An EOR is likely not the best fit, unless your business is doing truly really well and are ready for the obligations of having employees. First of all, unless your new freelancing effort is going extremely well, you credit risk profile will likely mean most EORs will likely require you to pay a deposit for the employee equal to at least 1 month, and likely several, of the total cost of employment (salary + employer taxes + EOR management fee). You would still be required to pay any severance if required at separation, provide PTO (payout the PTO when the employee resigns in most countries in Europe), etc. Of course you could incorporate your own foreign entity (quite expensive) or do a non-residential payroll system, but non-residential payroll is also quite burdensome, even if it is substantially less expensive. Of course all of these involve paying employer taxes and contributions.
There are some countries, like Armenia, which have very low employer taxes and contributions, but in most cases you will need to stay with contractors if you want to not pay employer taxes.