Becoming an employer brings new legal duties. Setting up correctly from the start prevents costly penalties.
Setup steps
- Get an Employer Identification Number from the IRS.
- Register with your state for payroll taxes and unemployment insurance.
- Set up payroll and withholding.
- Obtain workers' compensation insurance as required.
- Display required workplace posters.
- Get required state or local registrations.
Paperwork
- Form W-4 for tax withholding.
- Form I-9 to verify work eligibility.
- State new hire reporting.
- A written offer letter and handbook.
Wage and hour compliance
- Pay at least the applicable minimum wage and overtime to non-exempt employees.
- Classify workers correctly as employees or contractors.
- Keep time and payroll records.
- Follow rules for breaks, leave and tipped employees.
Get help
Payroll services and accountants can reduce mistakes. A lawyer can help with offer letters, handbooks and classification. See our guides on contractor agreements and employee classification.
Frequently asked questions
Do I need workers' comp?
Most states require it once you have employees.
Can I pay my first hire cash?
No. Payroll taxes and records still apply.