A US company can pay an American contractor from its US bank account, on terms the contractor's accountant recognises, with the form the IRS expects each January. That's one of the practical reasons founders abroad form one. There's one line you mustn't cross, though: the one between a contractor and an employee.
Contractor or employee
The IRS looks at control: who decides how, when and where the work is done, whose tools are used, whether the person can work for others, and whether the arrangement is a project or a job. A designer who takes your brief, works her own hours on her own computer and invoices you is a contractor. A developer who works your hours, on your equipment, only for you and under your direction is an employee, whatever the contract says, and some states, California in particular, apply a stricter test. Getting it wrong can mean back payroll taxes and penalties, and for a foreign-owned company, a US presence it never meant to have.
Taking on a contractor
- A written agreement Scope, deliverables, fee, payment terms, who owns the work, confidentiality, and a statement that the contractor sets their own hours and methods and handles their own taxes. It's evidence of the relationship as much as a contract.
- A W-9 before the first payment The contractor's legal name, address and taxpayer number. You need it for the 1099, and chasing it after the fact is how January gets difficult.
- Pay from the company account By bank transfer from the company's account, against an invoice, on the agreed terms. Never from your personal account.
- Track each contractor's total You'll need each contractor's total for the year in January. The Contractors page in your dashboard builds the list from your books.
Form 1099-NEC
For each US contractor you paid $2,000 or more by bank transfer or cheque during the calendar year, the company files Form 1099-NEC with the IRS and sends a copy to the contractor by 31 January. The threshold was $600 for years and rose to $2,000 for payments made from 1 January 2026, with inflation adjustments after that. Payments by card or through a payment app are reported by the payment company instead. Payments to a corporation are generally exempt, while payments to an individual or to an LLC taxed as a partnership aren't. Contractors outside the US doing work abroad aren't reported on a 1099 at all, but keep a W-8BEN from each for your records. Every plan prepares the forms, and Standard and Premium file them for you.
What contractors don't change about your tax position
Independent contractors working on their own terms don't make the company a US employer, and on their own they don't give it a US trade or business. A contractor who's really an employee, or who can sign contracts for the company, can. Keep the agreement honest and keep that authority with you.
If you need an employee
A US employee means registering for payroll taxes with the IRS and the state, unemployment insurance, workers' compensation, employment law, and a US presence that brings US income tax with it. Most foreign-owned companies that need one use an employer of record, which employs the person for you in return for a monthly fee, until the company is ready to be a US employer itself.