If you have an LLC and are looking to hire employees, you may be wondering what the process looks like. How do you go about finding someone who is qualified and trustworthy for your small business?
What paperwork needs to be filed with the government? Hiring employees is also an opportunity to grow your business and bring more value.
Before you do that, make sure you have a solid plan on how will this new person add value to what you are doing or help increase profitability.
This article will answer all of your questions and walk you through the entire hiring process.
Step 1: Define the Role
Hiring employees starts with understanding what your business needs. You need to assess the type of work you are doing and define a role for hiring employees.
It may be something as general as "office assistant" or something more specific like "graphic designer."
You should also consider whether hiring employees is better than outsourcing a task to a freelancer or hiring a third-party agency.
After you have defined the role, you should write down a detailed description, including employee benefits, responsibilities, and expectations.
It will help with advertising for the position later on and defining what your employee will do once they join your business.
When hiring employees for your LLC, make sure to check their references and run a background check. This is also important to do so that you can verify if the person fulfills legal requirements and is legally allowed to work in the US (if they are not a citizen).
When you hire employees, it's also essential to familiarize yourself with the employment laws in your State.
Step 2: Advertise the Position
Now that you have defined the role and written a detailed job description, it's time to start advertising for the position.
You can do this in many ways, such as posting on job boards, networking sites, or even reaching out to friends and family.
Make sure to list all of the responsibilities and expectations of the job in the ad and what the salary will be. This will help weed out job applicants who are not a good fit for the position early on.
Step 3: Interview Candidates
After you have received job applications for the position, it's time to start interviewing candidates.
You should schedule interviews with at least five candidates (more if you are able to) for each position.
Prepare a set of questions that will help you learn more about their past experience and qualifications, as well as their work ethic.
Make sure to ask follow-up questions when appropriate and encourage them to tell stories from previous jobs so that you can get a better sense of how they might fit in with your team.
Step 4: Hire Your First Employee
Small business owners often find it hard to let go and trust someone else with their business. But, when hiring your first employee, it's important to give them clear instructions and set boundaries.
After you've made up your mind on who should be your new employee, the next step is actually to hire them.
Write an offer letter or email and plan for onboarding the new employee. This will help make the transition smoother and ensure that your new hire is productive from day one.
Once they start working, remember to talk with them often and keep the lines of communication open. You don't want your new employee to become frustrated because they aren't sure what you expect from them. Think about setting up a new hire reporting system to track their progress.
It is also vital to run background checks and do pre-employment screening, paying close attention to things like criminal history, credit history, and other things that can get in the way.
Step 5: Get an EIN
Although the chances are that you already have an employer identification number (most LLCs obtain it to open bank accounts), you should still make sure that your Federal Employer Identification Number (EIN) is properly registered with the Internal Revenue Service.
If you don't have an employer identification number, make sure to obtain it as soon as possible from the IRS website.
To do this, you will need the name of your LLC, its mailing address, and the date when it was formed.
The EIN is essentially a nine-digit number that will be used to identify your company for tax purposes and pay taxes.
Make sure to keep this number confidential - it should not be shared with employees or anyone else outside of your business.
Step 6: Obtain Tax Forms and Insurance
New employees should fill out Federal W-4 Form (Employee's Withholding Certificate) and submit it to you to withhold the federal income tax from the federal wage.
Federal income tax withholding is mandatory, but an employee may claim an exemption if they had no tax liability during the previous year and expects to have none in the coming year.
Form I-9 verifies an employee's identity and eligibility to work in the US. Employers must retain this form for a 4-year period after hiring or one year after employment is terminated, whichever comes later.
The Form W-2 is a report that summarizes all of the employee's wages and any taxes withheld throughout the year.
The LLC owner will need to send this form to the employee at the end of the calendar year. They'll also need to submit documents to Social Security Administration. Form W-2 is required only for employees and isn't applicable to independent contractors.
Workers' Compensation Insurance (Health Insurance, Disability insurance) is a state-mandated insurance program that provides benefits to employees who get injured or fall ill as a result of their job.
Most states require employers with one or more employees to carry Workers' Compensation Insurance.
You can find more information about tax forms and insurance on the SBA website to help withhold taxes.
Step 7: Register with the State's labor department
The Department of Labor handles state unemployment compensation taxes. State unemployment taxes are paid by LLC owners to finance temporary assistance for workers who have lost their jobs.
Once you have chosen your employee, you will need to register with the State's labor department. This is a process that can vary from State to State, so be sure to do your research ahead of time.
In most cases, you will need to complete an application and provide proof of employee eligibility.
You may also be required to pay a small fee. Detailed information about the application can be found on the Department of Labor website.
Step 8: Report Employment Taxes
To withhold taxes, an employer has to set up a payroll system. Payroll taxes have to be withheld from LLC employee wages and matched by the employer. The funds are then sent to the IRS, social security taxes, and Medicare.
As an employer and the owner of the LLC, you must withhold federal income taxes, Social Security tax, and Medicare tax from your employee's wages. In some states, employers also have to withhold state taxes.
Your State's tax agency will tell you how to register for state taxes and which forms to use. Consider asking for professional help to set up your payroll system.
Can I Hire Independent Contractors Through My LLC?
Yes, you can hire an independent contractor through your limited liability company. Hiring your first independent contractor entails providing them with a form W-9 that has to contain Taxpayer Identification Number (or Social Security Number or the EIN).
Additionally, employers have to fill out Form 1099-MISC and send it to the IRS. This form also has to be provided to the independent contractors. Lastly, Form 1096 is sent to Social Security Administration with the purpose of summarizing all tax returns related to independent contractors.
Can an LLC Have a 1099 Employee?
Yes. Hiring employees with 1099 means you are hiring an independent contractor. The minimum wage is set by your State. You are not obligated to pay taxes, sick leave, or other benefits that you would with a regular employee.
Can You Be a Member and Employee of an LLC?
Technically, no. An LLC is considered a separate legal entity from its owner, which means that it cannot be the same person as an employee of the business.
Instead, you have to file a tax statement for your business to declare your profits and losses. If you want to get paid, you must extract money from the LLC's profits as a distribution in proportion with your share of ownership.
How Many Employees Can an LLC Have?
LLCs are allowed to have an unlimited number of employees. An LLC is not required to have employees and can instead operate as a sole proprietorship or partnership. However, if an LLC decides to hire employees, it must comply with state and federal employment laws.
Can Employees Act as Registered Agents for LLCs?
Yes, but it is not recommended to hire employees to act as your registered agent. This is because they will be the point of contact for all official communications from the State, and if they are not familiar with your company's operations and procedures, it could lead to mistakes.
It is better to hire a commercial registered agent service that can handle these duties for you.
Adding an Employee to an LLC: Conclusion
If you're feeling overwhelmed by the process of hiring your first employee, don't hesitate to seek professional help.
A good staffing agency can connect you with qualified candidates and take some of the burdens off your shoulders.
By following these tips and working with a reputable staffing agency, you'll be on your way to finding the perfect fit for your business.