Ask a US company why they will not hire the strong engineer in Prague and, sooner or later, you get some version of this: “we can’t, we don’t have an entity over there.” It is said with total confidence, and it kills the conversation on the spot.
It is also, for the situation that actually matters, wrong. It confuses two completely different things: employing someone and contracting someone.
Employment is the hard version
If you want to put a person in another country on your payroll, as your employee, then yes, it gets involved. You generally need either a legal entity in that country or an employer-of-record service to stand in as the local employer, handle local labor law, run local payroll, and withhold local taxes. That is real, and it is where the “you need a presence there” belief comes from.
But almost nobody making a first cross-border engineering hire actually wants to employ the person. They want the work done.
Contracting is the easy version
An independent contractor is not on your payroll. They are a vendor. The engineer runs their own business, invoices you for their work, and pays their own taxes in their own country. You need no entity, no branch, no employer-of-record, and no local payroll, for the same reason you need none of those to pay a design studio in Berlin or a law firm in London.
The mechanics on the US side are almost boringly simple:
- the engineer sends an invoice, you pay it like any other vendor bill
- they hand you a completed W-8BEN, a one-page form that certifies they are a non-US person, so you withhold nothing
- a short contractor agreement covers scope, rate, payment terms, and who owns the resulting code
- your accountant treats it as a foreign vendor payment, which they have done a thousand times
That is the entire setup. No presence in their country is required at any point, because you are not operating in their country. They are.
Why the myth persists
The belief survives because it is repeated by people who only ever think about employment, and because a lot of vendors benefit from companies believing the whole thing is a legal minefield. It is not. The minefield is employment. Contracting a foreign vendor is something the US economy does at enormous scale every single day.
The next time the “we have no entity there” reflex comes up, the honest response is: you do not need one. You are not employing them. You are buying their work, and you already know how to pay a foreign supplier.
If “we don’t have an entity there’’ has been the thing stopping you, here is the contractor structure in full, including the exact forms and the clauses that matter. It is simpler than hiring locally, not harder.