Many people who start a business do so either as a solo entrepreneur or with a partner or partners who share wholly in the ownership of the business. As a new venture’s business volume grows (as is likely intended), there will come a point where it makes sense to hire an employee or employees in order to take over some of the day-to-day tasks associated with operating the business in order for the founders to focus solely on growth, strategic planning, and other tasks related to business leadership.
Hiring an employee can be a complicated process, as it triggers many state and federal obligations that are not present when a venture is operated solely by its owner or owners. For this reason, it is important for business owners who are considering hiring their first employee to discuss the matter with an attorney familiar with California business and employment law. Some of the steps involved with making a first hire are detailed below. For specific information about your situation, call our office today.
Obtain an EIN from the IRS
One of the first steps involved in hiring an employee is obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Many business owners will have already done this, as an EIN is generally required to open a business bank account.
Register with the Employment Development Department (EDD)
If you plan on paying more than $100 to an employee within a calendar quarter, you must register with the EDD. The EDD is the state agency responsible for the administration of unemployment insurance, employment training tax, state disability insurance, and state personal income tax withholding.
Obtain workers’ compensation insurance
All employers in the state of California are required to carry workers’ compensation insurance. This type of insurance provides a no-fault system of compensation in the event that a worker is injured at work or develops a work-related illness. Workers’ compensation claims are administered by the Division of Workers’ Compensation.
Ensure compliance with state and federal employment law
Business owners need to remember that being an employer subjects them to liability under certain federal and state laws that prohibit workplace discrimination. As a result, the jokes that you have been making with your business partner in the office that stay between the two of you may no longer be appropriate and may even result in a discrimination lawsuit being filed against your business if made in front of your new employee. In addition, the law prohibits employers from asking employees certain questions during the hiring process or making hiring decisions based on certain characteristics. For this reason, it is extremely important to ensure that you are in compliance with federal and state law by discussing your circumstances with an experienced lawyer.
Determine employment eligibility
Employers are required to verify that employees are legally allowed to work in the United States and must complete Form I-9 within 3 days of making a new hire. This form requires employers to examine documents that confirm an employee’s citizenship or their eligiblity to work in the United States
Contact a Mountain View, California startup lawyer today to discuss your situation
Making your first hire is an extremely important step for any growing business and there are significant legal issues that may arise of which business owners should be aware. Fortunately, an experienced lawyer can help navigate the potential pitfalls associated with hiring your first employee and ensure that expanding your business goes as smoothly as possible. To schedule a consultation with Silicon Valley startup attorney Claire Kalia, call Kalia Law, P.C. today at 650-701-7617 or send us an email through our online contact form.