5 Things Every Business Owner Should Do BEFORE Hiring Their First Employee

Congratulations! Your small business is growing and you’ve made the decision that you are going to begin hiring employees to help your company continue to expand and improve. This is an exciting prospect for any small business owner, and far too many get so caught up in that excitement that they fail to properly understand and prepare themselves for the legal challenges inherent in employment.

Below we have outlined five essential steps that every business owner should take BEFORE hiring their first employee. Please keep in mind that this blog is not intended as legal advice or tailored to your unique circumstances. For employment law advice and guidance relating to your specific business needs, please contact Integrated General Counsel today!

1) EIN

Any business that employs workers is required to file for an Employer Identification Number from the Internal Revenue Service. EINs are utilized for federal tax withholding purposes, and many people consider them to be the business or corporate equivalent of a social security number. No matter your business entity, whether you own a sole proprietorship, LLC, corporation, or other legal entity, all businesses that want to hire employees must have an EIN.

2) Set up Payroll/Withholding

As an employer, you need to have a reliable system in place for keeping track of payroll. It is your responsibility to withhold necessary taxes like Social Security Taxes from your employees’ paychecks. This is not a simple thing to calculate and execute. You may want to outsource your payroll and withholding to a professional organization, or you will likely want to utilize some form of technology to help you. Either way, you should have a system in place before you make your first hire to ensure you remain compliant with all employer payroll/withholding requirements.

3) Understand Employer Hiring Obligations

Aside from withholding, employers in the US have numerous obligations which they must fulfill when hiring employees. For example, they must have all new employees fill out an I-9 to ensure they are eligible to work in the US, and they must also have new hires fill out a W-4 that they will then be required to submit to the IRS. These two documents only scratch the surface when it comes to your hiring obligations as an employer, and it is vital that you are aware of all of them prior to hiring your first employee.

4) Create necessary contracts

There are a wide variety of contracts which you may choose to utilize and have your new employees sign. You may or may not elect to have your employees sign Employment Agreements. You may simply want them to sign a Nondisclosure Agreement. You should sit down with a knowledgeable business attorney to discuss your goals and concerns with regard to hiring employees, and decide which contracts are right for your needs. Your attorney can then help you draft enforceable agreements which you will then have your new hires sign.

5) Create policies and employee handbook

We have previously discussed how important it is that every business with employees create an employee handbook. You can read that blog by clicking here. Before you attempt to make your first hire, you need to sit down and figure out your company’s employee policies. Then you must draft those policies and other relevant information regarding employment at your company into a handbook.

Integrated General Counsel can help you with all legal aspects of making your first hire. As a small business owner, growing to the point where you are ready to make your first hire is incredibly exciting. However, it is vital that you take the proper steps to prepare ahead of time so that you aren’t faced with serious legal challenges later. Give us a call today!

Integrated General Counsel