You’ve decided that you need another person in your business – you can’t hire someone as an independent contractor for various reasons (see last week’s blog post for more information) and have found outsourcing is too expensive. You are ready to join the thousands before you that have become employers. However, before hiring employees, there are several questions you should ask:
- Do you need intellectual property agreements with clients?
- What tax forms are you going to have to file?
- Are you going to meet any thresholds for complying with other laws?
If your employees are going to be making anything for the business, such as software, pictures, manuals, or products, or are going to be exposed to any trade secrets of the business, such as customer lists, financial information, or marketing secrets, you are probably going to want employees to sign intellectual property agreements. These agreements vary in what they cover but in most cases state that anything created for the company during the term of employment is owned by the company and that any intellectual property owned by the company must remain confidential. Of course, IP agreements vary depending on the company so speak with your Denver business lawyer to determine what yours should have in it.
If you are an s-corporation, you are probably already filing most tax forms needed for having employees (and if you aren’t, speak with your accountant to see if you should be!). Hiring an employee probably won’t change much except the amounts owed with each form. However, if you aren’t an s-corporation and you are hiring your first employee, welcome to a new world of forms, fees, and taxes. Just some of the forms you will need to file are an IRS 941 quarterly, an IRS 940 yearly, Colorado Department of Revenue forms, unemployment insurance forms, possibly occupational privilege tax forms, worker’s compensation and depending on your jurisdiction miscellaneous other forms. If this is your first employee, your accountant or bookkeeper should be your first resource to make sure everything is filed correctly.
Depending on the number of employees you have, you may have to comply with different laws. All businesses, with only a few exceptions, have to comply with wage and hour laws and pay at least minimum wage. However, providing health care and complying with FMLA rules, ADA rules, and other laws vary on the size of the company. When hiring employees, you need to talk to your attorney to determine what rules you need to follow based on the number of employees you have.
While these questions are some of the questions you need to ask, when hiring an employee there are thousands of others. If you are thinking about hiring an employee, you can always sign up for my seminar at the Front Range SBDC on the basics of hiring employees or contact me for one-on-one help.