EOR vs Setting Up Your Own Entity in India: Real Cost & Timeline Comparison (2026)
If you're a foreign company planning to hire in India, this is the decision that actually determines your timeline and budget: do you use an Employer of Record (EOR) to hire without setting up a company, or do you incorporate your own entity and hire directly? There's no universally right answer — it depends almost entirely on how many people you plan to hire and how committed you are to India long-term. This guide uses Business Setup's own transparent pricing ($150/employee/month for EOR; $2,500 one-time plus $9,000/year all-inclusive for an entity) to work out exactly where that break-even sits.
The quick answer
Use an EOR if you're hiring 1-5 people, want to be operational within days, and aren't yet certain India is a long-term bet. Set up your own entity if you're planning to scale past 5-6 employees, need a registered legal presence for contracts or banking, or India is clearly part of your long-term strategy (not just a hiring experiment).
Side-by-side comparison
| EOR | Own entity (subsidiary) | |
|---|---|---|
| Time to first hire | Days to ~2 weeks | 3-6 weeks (incorporation + bank account) |
| Upfront cost | None (no setup fee with Business Setup) | $2,500 one-time (Business Setup) |
| Ongoing cost | $150 per employee/month (Business Setup) | $9,000/year all-inclusive (Business Setup), regardless of headcount |
| Who is the legal employer | The EOR provider | Your own Indian entity |
| Compliance responsibility | Mostly handled by the EOR | Your responsibility (or your compliance provider's) |
| Best for | Testing the market, 1-10 hires | Scaling teams, long-term India presence, GCCs |
Cost in detail
EOR
EOR fees across the broader market range from roughly $99 to $699 per employee per month depending on the provider. Business Setup's own EOR service is priced at $150 per employee per month — this fee sits on top of the employee's salary and statutory contributions (PF, ESI, gratuity), and there's no separate setup fee.
Own entity
With Business Setup, incorporating and operationalizing a subsidiary is a one-time cost of $2,500, covering incorporation, registrations (PAN, TAN, GST), and bank account setup support. After that, ongoing annual compliance runs $9,000 a year, all-inclusive — covering accounting, tax filings, ROC compliance, and resident director services — and this cost applies whether you have 2 employees or 20, since it's fixed overhead rather than per-employee.
Timeline in detail
An EOR arrangement can have your new hire legally employed and receiving their first paycheck within days to about two weeks, since you're plugging into an already-registered legal entity. Setting up your own subsidiary, by contrast, realistically takes 3-6 weeks end-to-end — incorporation itself can be done in under two weeks in many cases, but opening a functional corporate bank account and completing the remaining registrations (GST, PF, ESI enrollment) is what usually stretches the timeline.
If you need someone working and paid within the month, EOR is the only realistic option. If you have a 2-3 month runway before you need your first India hire, entity setup becomes viable.
Where the break-even point actually is
With Business Setup's actual pricing — $9,000/year all-inclusive for an entity versus $150/employee/month ($1,800/year per employee) for EOR — the math works out to a clean break-even around 5 employees ($1,800 × 5 = $9,000). Factor in the $2,500 one-time incorporation cost and the first-year break-even shifts slightly higher, to roughly 6-7 employees; from year two onward, once that one-time cost is behind you, the break-even settles at around 5 employees.
Below that headcount, EOR is the cheaper path. Above it, your own entity becomes more cost-effective — and the gap widens the more you scale, since the $9,000/year compliance cost stays fixed no matter how large your India team grows.
Can you switch later?
Yes — many foreign companies start with an EOR to test India with one or two hires, then transition to their own entity once headcount and commitment justify it. This transition needs planning: existing employees typically need new employment contracts with the entity, and you'll want continuity on notice periods and statutory benefits like gratuity and PF so nothing resets or gets lost in the switch.
Frequently Asked Questions
Should I use an EOR or set up my own entity in India?
Based on Business Setup's own pricing ($150/month per employee for EOR versus $2,500 one-time plus $9,000/year all-inclusive for an entity), an EOR is usually cheaper and faster below about 5-6 employees in India. Above that headcount, your own entity typically becomes more cost-effective, since the fixed compliance cost gets spread across a larger team.
How long does it take to set up an entity in India compared to using an EOR?
A subsidiary or private limited company typically takes 3-6 weeks to incorporate and become operational, including bank account opening. An EOR arrangement, by contrast, can have an employee legally hired and onboarded within a few days to about two weeks.
What are the ongoing costs of running my own entity in India versus an EOR?
With Business Setup, running your own entity costs a one-time $2,500 to incorporate, plus $9,000 a year in ongoing compliance — an all-inclusive figure covering ROC filings, tax returns, accounting, and resident director services, regardless of headcount. An EOR instead charges an ongoing per-employee monthly fee; Business Setup's own EOR service is priced at $150 per employee per month, with no separate setup cost.
Can I switch from an EOR to my own entity later?
Yes. Many foreign companies start with an EOR to test the India market with one or two hires, then transition existing employees onto their own entity's payroll once headcount justifies the switch. This transition needs careful planning around notice periods, contract continuity, and statutory benefit transfers.
Does using an EOR create legal risk that owning my own entity avoids?
A properly structured EOR arrangement shifts most day-to-day compliance risk (payroll, statutory filings, employment law) onto the EOR as the legal employer. Your own entity gives you full control but also makes you directly responsible for every compliance obligation, so the risk profile is different rather than simply higher or lower.
Not sure which path fits your India plans?
We help foreign companies model the real cost and timeline for both EOR and entity setup, based on your actual headcount plans — not a generic estimate.
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