Adding an Employee to an LLC: Everything You Need to Know
Adding an employee to an LLC is a necessary process as you continue to push for your business's growth.3 min read
2. Register Your Employees With the State Labor Department
3. Obtain Workers' Compensation Insurance
4. Set up a Payroll System
5. Post Employee Notices
6. Fill out and File an IRS Form 940 Each Year
Adding an employee to an LLC is a necessary process as you continue to push for your business's growth. One of the first steps in making sure you hire the right employees is to know the job functions you actually need them to perform. Some businesses find themselves becoming overwhelmed and simply hire employees to handle the workload without specific job duties in mind.
Start by looking forward with your business for one to three years and seeing where you want your company to be during those times. Create an organizational chart based on those future goals and be sure to include job title and job descriptions for positions that will need to be filled to create your vision.
Then begin to slowly fill in this chart by hiring employees that fit best in those positions. Your chart should include:
- An overview of each specific job and responsibilities each position will have.
- Which person will be responsible for supervising that position.
- Requirements of the position on a daily, weekly, monthly, and yearly basis.
- Ways to define and measure each positions goals.
- The procedures required to perform each job.
Federal, State, and Local Rules
It is important to keep in mind all the federal, state, and local rules and regulations when it comes to hiring employees in your industry. To make sure that these rules are followed, you can benefit from an in-house legal staff and human resource department. Some of the basic rules that will need to be followed when hiring employees include:
- Not discriminating against race, religion, gender, or disability.
- Respecting an applicant's privacy rights such as finances and marital status.
- Not implying things that the position or company cannot deliver.
- Observing all minimum wage laws and laws regarding hiring minors.
- Following all IRS guidelines for hiring employees and contractors.
There are also state and federal laws that you must follow before you can even hire your employees such as obtaining an employer identification number. This is required to allow you to pay taxes on your employees. To obtain an EIN, you can download the IRS form SS-4 at the IRS website.
Register Your Employees With the State Labor Department
After hiring employees, you will be required to pay unemployment compensation wages. This will provide relief for workers who lose their jobs. You can find this and other tax entities at http://workforcesecurity.doleta.gov/map.asp.
Obtain Workers' Compensation Insurance
You will need to have workers' compensation in place to protect your workers in the event they suffer a work-related injury. This can be obtained from a business insurance provider.
Set up a Payroll System
You will need to have a payroll system in place to withhold taxes and make your employees Social Security and Medicare payments. You should also check with state and local agencies to see if withholding is required for local entities as well. To know how much you are required to withhold for each employee, they will need to fill out a W-4 form which will list the number of allowances they are claiming.
In addition to the W-4, you should also have each employee will out an I-9 which verifies their ability to work in the United States. While this form does not need to be submitted, it should be kept on file in the event it needs to be produced to a government agency. Both the I-9 and W-4 can be obtained from the IRS website.
Next, you will have to report each of your new employees to the state reporting agency. The information you will need to supply includes:
- Social Security Number
- Date of Hire
- The company name and address
- Company EIN
These reporting agencies will enter information in the system for such things as child support and welfare benefits.
Post Employee Notices
Many government agencies require that businesses post workers' rights visible in the workplace on federal and state posters. These posters can be obtained from the Department of Labor and other entities.
Fill out and File an IRS Form 940 Each Year
You will be required to fill out a Form 940 to report your federal unemployment income tax each year. This form is required to be filed in any quarter that you have paid out more than $1,500 for employees that worked for more than 20 weeks in the year.
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