A. Hiring Employees

If your business plans on “hiring” staff (hiring staff implies workers will be employees), this seemingly easy thing to do can be fraught with potential legal pitfalls.  Knowing what steps to take from the start can help you avoid messy situations in the future.  According to the Small Business Administration, every business owner planning on hiring employees should complete the following tasks:

1. Get an Employer Identification Number (EIN) from the IRS by filing a SS4 Application on the IRS website.  It’s essentially a social security number for your business and is obtained by filling out a simple form.
2. Set Up Records for Withholding Taxes:  You must have employees fill out W-4 forms upon hire and send a copy to the IRS, and then submit annual W-2 forms for every employee to the Social Security Administration.  States may also have different reporting requirements, so research your area to find out what else you need to do.
3. Employee Eligibility Verification:  In order to make sure no one is working in the U.S. Legally, all employers have to submit form I-9 within three days of hire.
4. Register with Your State’s New Hire Reporting Program:  All employers are required to report newly hired and rehired employees to a state directory within 20 days of their hire or rehire date.  The process for doing so varies by state.
5. Obtain Workers’ Compensation Insurance:  All businesses with employees are required to carry workers’ compensation insurance coverage through a commercial carrier, on a self-insured basis, or through their state’s workers’ compensation insurance program.
6. Post Required Notices:  Employers are required to display certain posters in the workplace to inform employees of the rights and their employer responsibilities under labor laws.  Copies of posters and notices can be found online.
7. File Your Taxes:  Generally, employers who pay wages are subject to income tax withholding, Social Security, and Medicare taxes and must file IRS form 941, Employer’s Quarterly Federal Tax Return.  More information can be found on the IRS website.
8. Consider outsourcing payroll processing.  Payroll processing is one of the most complicated functions in running a business.  It seems simple but is not anytime there is an abnormal situation.  For example, if one of your workers has a child support order for say, a $150 payment each week.  What happens when the worker only works 3 days in a week due to illness?  Can you, should you, deduct and remit the entire child support payment leaving the worker with $100?  If not, how much can you, should you, deduct and remit?  If you make a mistake you might find yourself in a lawsuit or without a worker or both.