So, you’re seeing some success with your one-man band. Business is looking up, and it’s time to hire some help. We know it can be both exciting and scary to take that next step, so it’s important to keep certain things in mind as you hire your first employee. The IRS has specific requirements to keep you compliant with federal and state standards. Use the guidelines below to make sure you stay in tune with government regulations.
However, before taking the next step, it’s smart to assess the necessity and practicality of hiring someone. Some key questions to ask yourself include: Am I turning down work? Are my clients asking for more from me? Can a new employee work remotely? Once you’ve determined it’s the right time to hire, review the tips below to make sure everything is working in harmony for a smooth transition from solo to small business.
Apply for an Employer Identification Number (EIN)
Before you can hire anyone or open a bank account, you must be issued an Employee Identification Number from the IRS. You’ll need it to report taxes and other documents as your company grows. The filing process is made pain-free when you work with companies such as MyCorporation®.
Setting up proper paperwork and keeping up with responsibilities
As an employer, it will be your responsibility to keep records of employment taxes. This means that all your employees must complete a Form W-4, regarding federal income tax withholding, and a Form I-9, which verifies employee eligibility.
You must also report to the government wages paid and taxes withheld for each employee using a Form W-2. This form is sent to the Social Security Administration and must be submitted by the last day of January to report the previous calendar year. For detailed information from the IRS, check out the Employer’s Tax Guide, updated yearly. You’ll also want to seek information about your specific state’s tax requirements and new hire reporting program. Other seemingly small but significant steps toward meeting federal standards include obtaining worker’s compensation insurance and displaying required workplace posters, all necessary to help your business begin to thrive.
Decide a recordkeeping structure to keep track of finances
Once your company is legally registered with the federal government, opening a separate company bank account is a beneficial next step. This will allow you to keep track of your expenses. While you’re not required to keep receipts for expenses under $75, it’s a good practice when you’re first starting out. Decide how you will record transactions using either the cash or accrual method, and be sure to set up a payroll system that is clear to your employee. No one likes uncertainty with their paycheck.
As you take care of tax obligations and follow employee rights standards, you may begin to feel a little overwhelmed. As you embark on growing your company, remember that many have come before you, and our team is on hand to help you take confident steps toward your future.