Corp to Corp in USA staffing refers to a corporation to corporation agreement where a company contracts another registered business, usually a Limited Liability Company (LLC) or corporation, to provide services through its employee or consultant. Instead of hiring an individual directly, the staffing agency or client works with the contractor’s company. This arrangement is common in fields like IT, consulting, and engineering.
In a C2C setup, the consultant is not treated as a traditional employee. They are responsible for managing their own taxes, insurance, and business compliance. The hiring company avoids paying payroll taxes or offering employee benefits, as the worker is not on their payroll.
For this model to be legal, both parties must be officially registered businesses. It offers flexibility for contractors and reduces liability for hiring companies, but it also comes with legal and tax responsibilities that both sides must manage carefully.
Here, we’ll unpack the meaning, benefits, compliance requirements, and challenges of the Corp to Corp jobs in staffing, helping employers, recruiters, and contractors better understand how to navigate this model.
Key Takeaways
- Corp to Corp (C2C) involves a contract between two legal business entities, not individuals.
- It is common in IT, consulting, and remote project-based work in the U.S.
- C2C requires both parties to have valid business entities like LLCs or S-corps.
- Workers under C2C are not W-2 employees and must handle their own taxes and insurance.
- Using C2C in staffing offers tax benefits and flexibility but involves legal and compliance risks.
What is Corp to Corp?
Corp to Corp, or C2C, is a business arrangement between two companies where one company provides services to another through an individual who is an employee of the first company. This structure is frequently used in staff augmentation, especially in the IT industry.
For instance, a staffing agency may hire a software developer who is incorporated (through an LLC or S-corp). The agency then contracts that developer’s company, not the individual directly. The hiring client (end-client) pays the staffing agency, which pays the developer’s company.
Unlike W-2 or 1099 arrangements, C2C involves two registered business entities entering into a contract for services.
Who Uses Corp to Corp in Staffing?
C2C is commonly used by:
- Staffing agencies supplying contractors to clients
- Independent consultants who have formed LLCs or S-Corps
- Recruiters who work with subcontracting vendors
- End clients seeking to avoid employment liabilities
Industries where C2C is prevalent:
- Information Technology (IT)
- Software Development
- Engineering
- Project Management
- Healthcare Consulting
- Finance and Accounting
Requirements for a Corp to Corp Arrangement
To engage in a C2C contract legally, the following criteria must be met:
1. Business Entity Status
Both parties must be registered businesses. For the consultant, this usually means forming an LLC, S-corp, or C-corp and obtaining an EIN (Employer Identification Number).
2. Insurance Coverage
The contractor’s business may be required to carry:
- General Liability Insurance
- Professional Liability (Errors and Omissions) Insurance
- Workers’ Compensation Insurance
3. Compliance with IRS Rules
C2C relationships must not misclassify employees. The IRS scrutinizes whether the individual is truly independent and not under the direct control of the client.
4. Written Contract
A formal agreement outlining scope of work, deliverables, payment terms, and confidentiality must be signed.
Difference between C2C vs W-2 vs 1099: A Comparison
| Aspect | Corp to Corp (C2C) | W-2 Employee | 1099 Independent Contractor |
|---|---|---|---|
| Employer Taxes | Paid by contractor’s business | Paid by employer | Paid by individual |
| Benefits | Not included | Usually included | Not included |
| Legal Entity | Required | Not required | Not required |
| Control by Client | Less control | High control | Varies |
| Payment Structure | Invoice-based | Payroll | Invoice-based |
| Tax Reporting | Form 1099 to business | W-2 | 1099-NEC to individual |
Benefits of Corp to Corp in Staffing
1. Tax Advantages
C2C contractors and Corp to corp insurance can write off business expenses and manage taxes more efficiently through corporate structures.
2. Professionalism
Corporations add credibility and professionalism to independent consultants.
3. Reduced Liability
The client or agency has lower risk of misclassification compared to 1099 contractors.
4. Flexibility
The contractor has more control over their business, projects, and schedule.
5. Higher Earnings Potential
Corporation-based contracts often allow for higher billing rates due to the reduced overhead for the client.
Challenges and Risks in C2C Staffing
1. Legal Compliance
Failure to properly structure the relationship can lead to IRS audits, misclassification penalties, or contract disputes.
2. Insurance Requirements
Many agencies require expensive insurance coverage that solo contractors must obtain.
3. Limited Employee Protections
There are no benefits, unemployment insurance, or workers’ compensation unless the contractor arranges for them.
4. Complex Tax Filings
Filing taxes for an LLC or S-corp is more complicated than individual filings.
5. Lack of Job Security
As with most contract work, C2C arrangements do not guarantee job stability.
How Staffing Agencies Use Corp to Corp
Staffing agencies frequently source C2C contractors through vendor partnerships or direct relationships. The process often follows this model:
- Client shares job requirement
- Agency sources C2C consultants
- In Corp to corp jobs consultant is screened and submitted
- If selected, a Master Service Agreement (MSA) is signed
- The consultant begins work and invoices the agency
- Agency pays the consultant’s company
Many agencies work with third-party vendors that supply C2C consultants, forming a multi-tier chain between the client and the end worker.
Key Clauses in Corp to corp Contracts
If you’re signing or drafting a C2C contract, ensure these sections are included:
- Scope of Work
- Start and End Dates
- Rate and Payment Terms
- Termination Clause
- Confidentiality and IP Ownership
- Non-Compete and Non-Solicit
- Indemnification
- Insurance Requirements
Corp to Corp Compliance Considerations
1. IRS Common Law Rules
The IRS uses three categories to determine employment status:
- Behavioral control
- Financial control
- Type of relationship
If the client controls the work environment, the worker might be seen as an employee.
2. State Labor Laws
States like California (under AB5) have stricter definitions of independent contractors. Even if you’re C2C, you may still be classified as an employee under state rules.
3. E-Verify and Work Authorization
All C2C workers must be legally authorized to work in the U.S. through Green Card, H-1B, EAD, or Citizenship.
When Should You Choose Corp to Corp?
Choose C2C if:
- You are an experienced contractor or consultant
- You want to run your own business
- You have the ability to manage your taxes and business obligations
- You work in high-demand fields like IT or consulting
- You understand the risks and compliance responsibilities
Avoid C2C if:
- You prefer the benefits and stability of employment
- You’re new to the contracting world
- You don’t want to deal with incorporation or tax filings
Corp to Corp and Immigration: H-1B Considerations
Foreign nationals working under H-1B visa sponsorship can participate in C2C setups only if:
- They are employed by a visa-sponsoring employer
- The employer contracts with a staffing agency or client
An H-1B holder cannot start their own C2C business and work for themselves due to visa restrictions.
Tips for C2C Contractors
- Register your business legally (LLC/S-corp)
- Open a separate business bank account
- Keep detailed records of invoices and expenses
- Invest in accounting software or a CPA
- Carry required insurance coverage
- Stay current with IRS and state tax filings
Tips for Recruiters Working with C2C Talent
- Verify legal business status of the contractor
- Confirm tax ID (EIN) and authorization to work
- Avoid co-employment by limiting control and direction
- Clarify chain of contracts if working with subcontractors
- Use strong legal agreements to protect all parties
The Future of C2C in the Staffing Industry
As the gig economy grows, C2C continues to thrive in professional sectors. With remote work, freelancing, and on-demand talent shaping the future of work, C2C models offer flexibility and scalability for both contractors and clients.
However, rising scrutiny from the IRS, state governments, and legal bodies means that businesses must stay compliant and informed. The key is transparency, legal rigor, and solid documentation.
FAQs
Is Corp to Corp legal in the USA?
Yes, it is fully legal as long as both parties are registered businesses and follow IRS guidelines and labor laws.
Can I work on a C2C basis without forming a company?
No, you must have a legal business entity like an LLC, S-Corp, or C-Corp to engage in C2C contracts.
How does taxation work in a C2C contract?
You are responsible for self-employment taxes, estimated tax payments, and business filings. The client does not withhold any taxes.
What is the difference between C2C and 1099?
Both are independent, but 1099 is for individuals. C2C is for businesses providing services through contracts.
Can I use a C2C model if I’m on an H-1B visa?
Only if you are employed by a sponsoring company. You cannot freelance or operate your own business on H-1B.