Opening a US bank account can be a difficult process. There are many reasons a company chooses to do so, but there are also times when it may not be the right solution.
Many global companies worry that they won’t be able to hire American workers if they don’t have a US bank account to draw from. Is it absolutely necessary to have a US bank account before you hire an American worker?
Identify the Type of Worker
Do you need a US bank account to hire US workers? The answer is, “it depends.” The first step is to take a look at the type of worker you’re entering into an agreement with.
If you’re hiring an independent contractor, you don’t need a US bank account. You and the contractor will negotiate the terms of payment, which will include currency and method of payment. If you pay large sums, it may help you to have a US bank account and maintain a balance in it.
Does the situation change when it comes to hiring employees for your business? While it’s not strictly necessary to have a US bank account, opening one can make it much easier to administer US payroll for employees.
How a US Bank Account Helps
Foreign employers may be required to withhold payroll taxes and remit them to the IRS. To do so, the employer will need to register with and receive an employer identification number from the IRS.
Once you have an EIN, it becomes easier to open a US bank account, although you’re not out of the woods yet.
Not every foreign company will want to register. You might be testing out the US market before committing to opening a branch office there, for example. If you plan to hire American employees, however, you’ll need an EIN.
Without the EIN, you can’t administer payroll taxes for your US employee. You don’t necessarily have to open a US bank account to pay these taxes, but there are some complex rules if you want to pay through a foreign institution.
First, all funds sent to the IRS must be in US dollars. If you send your payments from a foreign bank, they must be affiliated with a US bank. Smaller banks may not be able to provide this requirement.
Having a US bank account simplifies the process. It also helps you avoid fluctuating exchange rates and additional fees, such as wire transfer fees.
No Bank Account? No Problem
Suppose you’re setting up in New York, and you want to hire an employee to help. You’ll need an EIN, but the process of getting one can be difficult for international companies.
You could choose to wait and maybe miss out on hiring the brightest talent for your new office. Or you could partner with a professional employer organization.
The PEO is already established where you want to do business, and they’ll act as a co-employer when you want to hire an employee. They already have an EIN, which may speed the process along.
They can also assist you by providing access to a US bank account, which they already have set up. Better yet, they could help you navigate US payroll taxes and regulations. It’s the easiest solution to what can otherwise be a convoluted and slow process.
Start Hiring Employees Today
The world of business won’t wait, so work with a PEO to cut through the red tape around hiring American workers for your business.
You don’t need to have your own US bank account, although it can simplify your payroll. What you really need is a partner with the expertise and resources to help you get started today.