Setting up a local entity costs $5,000 to $10,000. It takes three to six months before you can legally pay anyone.
An Employer of Record costs a monthly fee per employee. Someone can be working within days.
For small teams the arithmetic isn’t close.
But that comparison assumes employment is why you’d register a company. Usually it isn’t. Companies incorporate to sign local contracts, hold assets, import goods, or bid for government work.
If any of those apply to you, the cost comparison below matters far less than you’d think.
The short answer
Choose an Employer of Record when you need people in a market and nothing else. One to twenty employees. An uncertain horizon. Or several markets at once.
Set up a legal entity when you need a legal presence for commercial reasons beyond employment. Or when headcount in one market is large enough and settled enough to clear the fixed cost of running a company.
The mistake to avoid is treating this as a pure cost question. Cost decides it only when employment is your sole concern.
What a local entity actually costs
Entity costs split into money spent once and money spent every year. Quotes usually cover the first and stay quiet about the second.
Setting up
| Item | Typical range |
|---|---|
| Incorporation and registration | $800 to $3,000 |
| Legal drafting and advisory | $1,500 to $7,000 |
| Registered office, first year | $400 to $1,800 |
| Local director or nominee, first year | $1,200 to $4,500 |
| Bank account opening | $300 to $1,700 |
| Tax and social security registration | $800 to $2,000 |
| Total to get started | $5,000 to $10,000 |
The spread is wide because requirements differ sharply by market.
Some countries demand paid-up share capital before registration completes. Some require a resident director, so you either hire one or pay a nominee service. Some process registration in weeks. Others take months.
Running it
| Item | Typical annual cost |
|---|---|
| Bookkeeping and accounting | $2,500 to $7,000 |
| Statutory audit | $2,000 to $5,000 |
| Company secretarial and annual filings | $1,000 to $3,000 |
| Tax return preparation | $1,000 to $3,000 |
| Registered office renewal | $400 to $1,800 |
| Local director or nominee | $1,800 to $2,200 |
| Payroll administration | $900 to $2,000 |
| Total per year | $9,600 to $24,000 |
Call it $800 to $2,000 a month in fixed cost, before a single salary.
That figure does not move with headcount. Two employees or forty, the company still needs auditing, filing, and administering.
That fixed floor is the whole story. It’s what makes a company expensive for small teams and efficient for large ones.
What an EOR actually costs
Three components. Gross salary. Employer costs the law requires on top of it, which in Bangladesh add 16.39% of gross for a permanent employee. And the provider’s monthly fee.
Meteors charges $99 per employee per month across Bangladesh, India, and Pakistan. The rate does not change with salary.
No setup cost. No fixed floor. No annual audit.
Cost scales directly with headcount. That cuts both ways. It’s cheap when the team is small, and it keeps climbing as the team grows.
Fee structures vary across the market, and some providers add charges that don’t appear in the first quote. How much does an EOR cost covers what to check before signing.
Side by side over one, three, and five years
Both structures modelled at four headcount levels.
Figures use $1,200 monthly entity overhead, $8,000 setup, and a $99 monthly EOR fee. Salary and contributions are excluded from both columns, because they’re identical either way.
Two employees
| Year 1 | Year 3 | Year 5 | |
|---|---|---|---|
| Employer of Record | $2,376 | $7,128 | $11,880 |
| Local entity | $22,400 | $51,200 | $80,000 |
| Difference | EOR saves $20,024 | EOR saves $44,072 | EOR saves $68,120 |
Five employees
| Year 1 | Year 3 | Year 5 | |
|---|---|---|---|
| Employer of Record | $5,940 | $17,820 | $29,700 |
| Local entity | $22,400 | $51,200 | $80,000 |
| Difference | EOR saves $16,460 | EOR saves $33,380 | EOR saves $50,300 |
Ten employees
| Year 1 | Year 3 | Year 5 | |
|---|---|---|---|
| Employer of Record | $11,880 | $35,640 | $59,400 |
| Local entity | $22,400 | $51,200 | $80,000 |
| Difference | EOR saves $10,520 | EOR saves $15,560 | EOR saves $20,600 |
Twenty-five employees
| Year 1 | Year 3 | Year 5 | |
|---|---|---|---|
| Employer of Record | $29,700 | $89,100 | $148,500 |
| Local entity | $22,400 | $51,200 | $80,000 |
| Difference | Entity saves $7,300 | Entity saves $37,900 | Entity saves $68,500 |
At twenty-five people the entity wins from the first year, and the gap widens after that. Below thirteen people it never catches up at all.
Figures are illustrative and exclude salary and contributions, which are the same under either structure. Company costs vary considerably by market. Model your own numbers before deciding.
Where the crossover sits
Two things move it. The fee you pay, and how long you stay.
The fee. At $99 per employee, an entity at $1,200 monthly overhead only wins past twelve employees on run rate alone. You still have $8,000 of setup to earn back after that.
At a $599 fee, common among global providers, the entity wins on run rate from three employees. Setup takes about thirteen months to recover at that headcount, and under two months at ten.
The provider fee does most of the work in this decision. That’s why you check it before assuming an entity is the sensible option.
The horizon. An entity is a fixed cost you commit to for years. It makes sense when you’re confident about staying.
Earning back $8,000 of setup takes time. Exit after eighteen months and you’ve paid for a structure you barely used, plus the cost of closing it.
What a legal entity gives you that an EOR cannot
Here’s the part that usually decides it. Cost has nothing to do with it.
An Employer of Record solves employment. It does not give your business a legal presence. If you need one for anything beyond employing people, no fee comparison changes that.
Signing contracts under local law. Customer agreements, supplier contracts, and leases need a local legal person. An EOR employs your team. It doesn’t sign your commercial contracts.
Holding assets. Property, equipment, vehicles, and inventory need an owner registered in that country.
Importing and exporting. Customs registration, import licences, and trade documents all attach to a registered company.
Government tenders. Public procurement almost always requires local registration, and often local ownership thresholds too.
A local bank account. Collecting payments in local currency from local customers means a local account. That means a company.
Holding intellectual property locally. Some structures need IP registered in-market for tax or protection reasons.
Brand presence. In some markets, customers and partners treat a registered local company as a signal of commitment. That’s soft, but it’s real in relationship-driven sectors.
If any of these apply, incorporate. Then employ through your entity, because once it exists an EOR usually costs more than running payroll yourself.
What an EOR gives you that an entity cannot
The reverse is also true, and equally overlooked.
Speed measured in days. One to three days against three to six months. If a candidate has competing offers, that gap decides whether you get them.
Several markets on one agreement. Employing across Bangladesh, India, and Pakistan through an EOR means one contract, one invoice, one relationship. With entities it means three incorporations, three audits, three filing calendars, three sets of advisors.
A clean exit. Ending an EOR arrangement means notice periods and final settlements. Closing an entity means deregistration, a final audit, tax clearance, and months of process.
No fixed cost floor. With one employee you pay for one employee. An entity charges you the same whether you employ two people or none.
Testing before committing. Run a market for a year with two people and real revenue data. Then decide. Incorporating first means committing before you have evidence.
Someone else carrying the liability. Under an Employer of Record arrangement the provider is the legal employer and holds the statutory obligations. With your own entity, they’re yours.
The entity costs nobody quotes
Four costs that appear in no proposal and surprise people later.
Closing it down. Deregistration means a final audit, tax clearance certificates, settling liabilities, cancelling registrations, and formal dissolution. It commonly takes six to eighteen months. Throughout that period the entity still files returns and still needs its accountant, so the real cost is the length of the process rather than any single fee.
Dormancy is not free. A company that stops trading keeps its filing obligations until it’s formally dissolved. Businesses routinely pay for years of audits and returns on entities doing nothing, simply because closing takes longer than expected.
Director liability. In most markets a local director carries personal liability for statutory compliance. Some of it survives the entity’s closure. If you appointed a nominee, you’re indemnifying them. If you appointed an employee, you handed them a legal exposure they may not have understood.
Management time. The cost nobody counts, and usually the largest.
Someone in your finance team learns a new filing calendar. They chase an auditor across time zones. They answer regulator queries and manage advisors. Fifty hours a year at a senior salary is real money, and it comes out of work you actually wanted done.
Add these up and the true five-year cost of an entity runs well above the figures in the tables above.
Which fits your situation
Answer in this order. The first question settles most cases before cost enters the conversation.
1. Do you need a legal presence for anything other than employing people?
Contracts, assets, imports, tenders, or a local bank account. If yes, incorporate. A requirement settles this, not a preference. Employ through your entity once it exists.
If no, continue.
2. How many people, and for how long?
Fewer than twenty in one market, or an uncertain horizon: an Employer of Record, comfortably.
More than twenty-five, committed for several years: model both properly, because the entity may win.
3. How many markets?
More than one and the entity route multiplies everything. Three markets means three sets of setup, audit, filing, and advisory. An EOR handles them on one agreement.
4. What’s the actual EOR fee?
The crossover moves enormously between a $99 fee and a $599 one. Get a real quote before you model anything.
Can you start with one and switch later?
Yes. It’s the most common sensible path.
Companies use an Employer of Record to enter a market, hire a small team, and run for a year or two. Once the commercial case is proven and headcount justifies it, they incorporate and move the team across.
The transfer covers contract novation, re-registration with tax and social security authorities, benefits continuity, and preserving each employee’s length of service. That last one matters, because gratuity and severance entitlements build against it.
Done properly, the employee sees a change of employer name and nothing else.
Ask any provider how they handle this before you sign with them. One who makes the transition sound difficult is telling you something about how they see the relationship.
Frequently asked questions
Is an EOR cheaper than setting up an entity?
For teams under roughly twenty people in one market, yes, and by a wide margin. An entity carries $5,000 to $10,000 of setup plus $9,600 to $24,000 a year in fixed running costs, whatever your headcount. An EOR has no setup cost and scales with the number of people. The crossover depends heavily on the fee you pay.
How long does it take to set up an entity?
Three to six months in most markets. That covers incorporation, tax registration, social security registration, and opening a bank account. The bank account is often the slowest step and the one that derails timelines. You cannot legally employ anyone until the registrations complete.
Do I still pay employer contributions if I set up my own legal entity?
Yes, identically. Contributions are set by law and apply to any employer in that country. Choosing between an EOR and a company changes who administers and files them, not whether you owe them.
What happens if I close the entity later?
Deregistration needs a final audit, tax clearance, settling outstanding liabilities, and formal dissolution. It commonly runs six to eighteen months, and filing obligations continue throughout. The cost most companies never factor in is that stretch of time, not the closing fee itself.
Can I use an EOR while my entity is being set up?
Yes, and many businesses do. Registration takes months and good candidates don’t wait. Hire through an EOR now, then transfer the team once your entity is ready.
Is an entity better for compliance?
Not automatically. With your own entity, compliance is your responsibility and your liability. With an EOR, both sit with the provider. An entity gives you more control, which only helps if you have the local expertise to use it.
Which is better for hiring across several countries?
An EOR, in almost all cases. Each extra market means another incorporation, another audit, another filing calendar, and another set of advisors. An EOR covers multiple markets on one agreement and one invoice.
Does an EOR work for a permanent long-term team?
Yes. There’s no time limit on the arrangement and plenty of companies run EOR teams for years. The question is purely economic. Past a certain headcount held for a certain period, an entity costs less.
Working out which one you need
Start with the commercial question, not the cost one.
If you need a legal presence for contracts, assets, imports, or tenders, incorporate and stop comparing.
If employment is the only reason you’d register a legal entity, the numbers above almost certainly favour an Employer of Record until you’re well past twenty people in one market.
Meteors covers Bangladesh, India, and Pakistan on one agreement, and supports the transfer to your own entity when the time comes. Talk to us about the markets and headcount you’re planning. We’ll model both options against your actual numbers.
