Operations
Delaware LLC: employee vs contractor classification for your team
Classifying workers as employees vs contractors has significant tax and compliance implications. Here is how non-resident-owned LLCs should think about it.
Contractor (default for most LLCs)
Contractors are independent of the LLC: they set hours, use their own tools, and are responsible for their own taxes. LLC pays gross amount; issues 1099-NEC if US contractor ($600+) or 1042-S if foreign contractor with US-source income.
Far simpler for non-resident LLC owners. Most bootstrap operations work entirely through contractors.
Employee (significantly higher compliance)
Employees trigger: federal payroll tax (FICA, FUTA), state payroll tax (varies by state), state unemployment insurance, workers comp, IRS Form 941 quarterly + 940 annually, state filings, payroll-service costs ($30-100/month).
Hiring a US employee creates state-tax nexus in the employee's state. Many non-resident LLCs avoid this by working exclusively with contractors.
When to consider employees
Business model requires US-based on-site work (rare for non-resident bootstrap operations). Single most important consideration: the cost of compliance vs the strategic value of W-2 employment.
For most non-resident LLC operations, contractor-only is the answer until scale changes economics.
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