As a business owner, there comes a time when you will be contemplating growing your business. In Guidant’s 2021 Small Business Survey, 49 percent of small business owners said they planned on increasing their staff or expanding their business. To make this a reality, you must have the right business support in place, like the ideal employee. Not having the right resources or being unprepared could hinder your business’ growth prospects, or in some cases, lead to business failure. If you do think your small business is ready to hire its first employee, here is how to get started.
Apply For An Employer Identification Number
To be able to employ a worker, businesses need to register for their employer identification number (EIN) issued by the IRS. Your EIN is a 9 digit number that is used for business taxation and identification purposes. To apply for your EIN, you can apply online on the Internal Revenue Service’s (IRS) website or fill out Form SS-4. Take the time to ensure you understand all the questions and pre-application guidance before applying, including the required documentation. You will need a valid Taxpayer Identification Number (TIN), your business structure, and your business address.
Secure Workers Compensation And Medical Coverage
Before hiring your first worker, you will also need to think about implementing the right policies and protocols for their protection. This includes workers’ compensation insurance for your industry, which provides coverage for lost wages and injuries on the job. For instance, you will need workers comp medical if your business is a medical facility or you plan to hire a healthcare professional. Most states require employers to have workers comp insurance, except for the state of Texas.
The criteria for having workers comp insurance also varies according to your location as well. For instance, in Ohio, you are required to purchase workers comp insurance from the state fund but does not come with employer’s liability insurance. If this is the case, you may want to get stop-gap insurance for your business to protect yourself from negligence and injury lawsuits.
Clarify Your Tax Obligations As An Employer
As an employer, you will now be required to pay federal employee taxes including income tax, Social Security, and Medicare tax. This is according to the Federal Insurance Contribution Act (FICA). It is paid at the end of each month and is withheld from your employee’s paycheck or in the case of Social Security, employer contributions. Currently, the Social Security contribution rate for employers is 6.2 percent while Medicare requires a 1.45 percent contribution.
You will also need to file Form 941each quarter to reconcile the wages paid. To find out the filing process for your business’s state of operation, check with The American Payroll Association or your state’s tax agency.
A final note: Make sure your business is ready to hire its first employee. Ask yourself key questions like whether your business activity (and profits) is high enough to warrant hiring an employee and whether your business finances can handle the added costs of an employee. It is better to wait until your business is completely ready for all that comes with being an employer than to make the move prematurely.