Expanding into the U.S. contractor market is a huge opportunity, but the admin behind it can catch businesses off guard. From tax forms to payment structures, the U.S. system works differently to what most UK and international companies are used to. 

In this guide, we go through the key steps to get it right, whether you’re placing independent contractors, W-2 employees, or Corp-to-Corp workers.  

Step 1: Understand the Worker Types – Ask, Don’t Assume 

In the US, ‘contractor’ can mean several different things. The three most common arrangements are: 

• Independent Contractor (1099) – self-employed individuals who invoice for their work and handle their own taxes
• W-2 Employee – workers paid via payroll, with federal and state taxes withheld and handled by the employer  
• Corp-to-Corp (C2C) – where one business entity contracts with another; the worker is paid through their own company 

The right setup depends on the worker’s situation, and the best approach isn’t to guess, it’s to ask. Before onboarding begins, a few simple questions will point you in the right direction: Do they require benefits? Do they have their own business entity? How have they been paid before? Do they typically receive a W-2 or a 1099? 

We’ve previously covered exactly what to ask, and why it matters, in our guide: 5 Questions to Help You Determine the Right Onboarding Process for Your Contractor. 

Step 2: Get Your Business Set Up in the US 

If you‘re not utilizing an EOR, to pay anyone in the U.S., you’ll need an Employer Identification Number (EIN), the US equivalent of a company registration number for tax purposes. It’s free to apply for directly through the IRS, and in most cases, you can get one online immediately. 

Depending on the states your workers are operating in, there may also be state-level registrations to consider. This is one of the areas where complexity can creep up quickly, particularly if you’re working across multiple states. 

Step 3: Put the Right Contract in Place 

A clear, well-drafted agreement protects both parties and sets expectations from the start. What that looks like will vary depending on your worker type – a contract for a 1099 independent contractor will look different to one for a C2C arrangement or a W-2 placement. 

In all cases, the agreement should cover, but not limited to, the scope of work, payment terms, and intellectual property ownership. U.S. contracts tend to be more detailed than their UK counterparts, so don’t assume a standard template will cover you. 

Step 4: Collect the Right Tax and Onboarding Forms 

The paperwork at this stage depends entirely on how your worker is being engaged: 

For Independent Contractors (1099) you’ll need a completed W-9 form, which captures their taxpayer identification number. This is what you’ll use for year-end reporting. 

W-2 Employees complete a W-4 instead, which tells the employer how much federal income tax to withhold from each paycheck. An EOR will typically manage this process on your behalf. 

For Corp-to-Corp (C2C) rather than a personal tax form, you’ll collect the business entity’s EIN and verify their company details, including entity type and registration status. Getting this right from the start avoids complications down the line. 

Step 5: Pay Your Workers and Understand the Tax Obligations 

How you pay, and what your obligations are, differs by worker type: 

• Independent Contractors (1099) are paid in full, with no tax withholding. They handle their own taxes. You agree to payment terms upfront, and at year-end, if you’ve paid them more than $600 in a calendar year, you’re required to file a 1099-NEC form with the IRS and provide a copy to the contractor. The deadline is typically late January. 
• W-2 Employees are paid through payroll, with federal income tax, Social Security, and Medicare withheld from each paycheck. At year-end, the employer (or EOR) issues a W-2 form summarizing earnings and withholdings. An EOR handles all of this for you. 
• Corp-to-Corp (C2C) – you pay the contractor’s business entity directly, typically via an invoice. Tax obligations sit with their company, not with you as the engager. 

Step 6: Stay on Top of Ongoing Compliance 

U.S. employment law isn’t static, and requirements vary significantly by state. What’s straightforward at a federal level can look very different in states like California or New York for example, which apply their own rules around worker engagement. 

The longer a contractor works with you, and the more control you have over how they work, the more important it is to keep the arrangement under review. This is especially true when placing workers across multiple states simultaneously. 

Step 7: Just Hand It All Over to a Good EOR 

Everything we’ve covered above – entity setup, tax registrations, the right forms, payroll, year-end filing – a good Employer of Record handles all of it, for every worker type, from day one. 

And here’s the thing, this isn’t just about volume – even placing one or two workers in the U.S. means navigating EINs, state registrations, the right contracts, and the right forms none of which is free, fast, or simple to set up yourself. The cost and complexity rarely justifies going it alone, regardless of how many people you’re placing. 

With an EOR like Lead and Gain, there’s no entity to set up, no registrations to manage, and no year-end admin to scramble through. You place the talent, we handle everything else across 1099s, W-2s, and C2C arrangements, in all states. 

And unlike a generic EOR, Lead and Gain was built exclusively for recruitment firms. That means we understand the pace you work at, the challenges of placing across multiple clients and states, and what it takes to scale a U.S. contractor desk without the back-office being in the way. 

That’s the smarter way to place and payroll contractors in the U.S. Let’s talk.