Small Business Employment Issues
Hiring your first employee is a big step! Many regulations and laws affect the hiring, firing, and work of employees, ranging from the obvious—having a safe work environment, for example—to the relatively esoteric—laws affecting the rights of mothers to breast-feed their babies in the workplace, for example. When in doubt, seek professional counsel regarding your human resource issues. Also seek the input of your state business resources and the IRS for reporting issues. Human resources is a big topic!
Some companies try to classify employees as independent contractors to avoid Social Security taxes and withholding issues. Improperly classifying your workers can cost a company a tremendous amount of money. Employees should always be classified correctly. Form SS-8 will help you decide if your worker is considered an "employee" for Federal Employment taxes.
The first step in hiring employees is having a Federal Employer Identification Number. You will need to fill out Form SS-4 to get one. You will also need a state employer identifier number.
See if you must acquire other state specific numbers, such as a state unemployment compensation number.
Form I-9 is necessary to assure your potential employees are legally allowed to work in the U.S.
Form W-4 must be completed by the employee to determine income tax withholdings.
You will also need to complete other Federal forms, such as 940 and 941. It is highly recommended that you consider taking a brief class about employment issues.
Because payroll accounting and reporting is relatively complex, many businesses outsource payroll reporting to companies such as paychex.com. As was mentioned in Thinking Like An Entrepreneur, such companies providing valuable services to small businesses will be a big beneficiary of the growing number of small businesses and interest in entrepreneurship.