Business Category Business: career motivation and tips to move ahead

How to Legally Employ Someone for Your Small Business

When things start going well for a small business, inevitably operations get big enough to require some extra help from new employees. With the hiring process comes a new list of legalities that you will want to carefully consider to protect yourself, your business and your new employees.

Apply for an employer ID number from the IRS. If at startup you were the only employee, your social security number was probably your ID. However, when you start hiring others, you will need to add an employer ID.

Withhold the proper income taxes and social security taxes from your employees. The IRS Web site can provide you with all the proper forms (see Resources below).

Deposit the withholdings to the government. You may be able to do this through your bank.

File employer tax returns. Make sure you meet all deadlines to be in full compliance.

Hire only employees who are legally eligible to work in the United States. Have employees fill out an I-9 form from the IRS.

Fill out a W-2 form with your employees' Social Security numbers. This is what will be given to your employees at the end of the year.

Have each employee fill out a W-4 form and keep it on file so you know how much tax to withhold.

Check your local laws to know what type of disability and worker's compensation insurance to provide for your company and employees. Disability insurance can also cover you, so you may want to consider it even if you don't hire other employees.

Speak to an insurance agent or broker. This person can help you set up the most efficient insurance policy for the number of employees you have and the type of business you operate.


Be aware that you cannot ask about age, marital status, religious affiliation, race or sexual orientation during the hiring process. You cannot discriminate because of these factors when considering employees.