What happens when the owner of a business experiences sustained growth? After celebrating their accomplishment, they may realize that they need to hire more people to share the workload. While consultation with an experienced local business attorney is always the best course of action, this article aims to provide Bay Area business owners with some basic information on hiring their first employee.

Secure an Employer Identification Number (EIN)

For any business that has even one employee (other than the business owner), it is required that they register their business with the proper federal and state authorities. The Internal Revenue Service (IRS) requires every business with employees to register an Employer Identification Number (EIN). This unique 9-digit number is used for tax purposes.

A company’s EIN in many ways serves as the Social Security number for the business entity. In California, business owners can apply via the state’s Employment Development Department’s website. Business owners are advised to consult with an experienced local business attorney to ensure all necessary requirements are satisfied before hiring their first employee.

Establish Records for Tax Withholding

Taxes are an important consideration when preparing to hire your first employee. There are three primary types of taxes that business owners should be prepared to apply for:

• Federal income tax withholding. A new employee will need to file a Form W-4 (Employee’s Withholding Certificate) when they are first hired. This form asks the new employee how much federal income tax to withhold from their pay. You as the employer then submit this form to the IRS.
• Federal Wage and Tax Statement. Commonly called a “W-2”, this is the form that employees receive at the start of the new year. Form W-2 details an employee’s earnings and taxes withheld from the previous year.
• State taxes. Each state has different procedures for documenting state tax withholding for employees. Consultation with a Bay Area business attorney can help employers ensure they are within state tax compliance.

Background Checks and Employment Eligibility Verification

After you have posted your job and found some potential candidates, it is important to run a background check on the individual before finalizing the terms of employment. States vary when it comes to how comprehensive a background check can be, so be sure to consult with an experienced business attorney before performing one.

Employers can face fines and even criminal penalties if they hire someone who is not legally allowed to work in the United States. Employers must ensure that prospective employees complete Form I-9 before their first day on the job. This form asks employees to provide their contact information, Social Security number, and employment eligibility.

Report New Hires to State Employment Agency

Bay Area employers are required to report new hires to the state’s Employment Development Department within 20 days of their start-of-work date. This type of reporting helps the state keep track of anyone who may be behind or delinquent on payments to the state, such as child support or unpaid taxes.

Getting Professional Guidance

For new business owners, hiring their first employee can be a daunting process. For years, the professionals at Coepio Legal have been helping Bay Area business owners ensure that their human resource activities comply with state and federal requirements.