The New Business Owner’s Survival Guide: 10 Things to Do Before Hiring Your First Employee
- Kelly Lowry
- 6 days ago
- 3 min read
Starting a business is exciting. Hiring your first employee is a major milestone—it means your company is growing and you’re ready to expand. But bringing someone onto your team also comes with legal, financial, and HR responsibilities that many new business owners don’t realize until it’s too late.
Preparing before you hire can save you time, money, and potential legal headaches. Here are ten important steps every business owner should take before bringing on their first employee.
1. Obtain Your Employer Identification Number (EIN)
Before you can hire employees, you’ll need an Employer Identification Number (EIN) from the IRS. This number is used to report taxes, process payroll, and identify your business with federal agencies.
If you don’t already have one, obtaining an EIN is one of the first steps toward becoming an employer.
2. Register for State Payroll Taxes
Hiring an employee means you’ll be responsible for federal and state payroll taxes.
Depending on your state, you’ll need to register for:
State withholding taxes
State unemployment insurance
New hire reporting
Other employer-related tax requirements
Failing to register properly can result in penalties and interest.
3. Set Up Payroll Correctly
Payroll is much more than writing a paycheck.
You’ll need to:
Calculate payroll taxes
Withhold federal and state taxes
Track paid time off
Maintain payroll records
File quarterly and annual payroll reports
Issue W-2 forms
A reliable payroll system helps ensure accuracy and compliance.
4. Create an Employee Handbook
An employee handbook establishes expectations from day one.
It should outline:
Attendance
Paid time off
Workplace conduct
Anti-harassment policies
Safety expectations
Benefits
Discipline procedures
A handbook promotes consistency and helps protect your business.
5. Verify Employment Eligibility
Federal law requires employers to complete Form I-9 for every employee.
You must:
Verify identity
Review work authorization documents
Complete the form within required timeframes
Store I-9 forms separately from personnel files
Many employers also choose to participate in E-Verify to confirm employment eligibility electronically.
6. Purchase Workers’ Compensation Insurance
Most states require employers to carry workers’ compensation insurance.
This coverage helps protect both your employees and your business if a workplace injury occurs.
Requirements vary by state, so be sure you understand your obligations before your employee’s first day.
7. Prepare Your Hiring Documents
Every new employee should complete a standardized onboarding packet.
Common forms include:
Employment application
Offer letter
Form W-4
State withholding forms
Form I-9
Direct deposit authorization
Emergency contact information
Handbook acknowledgment
Policy acknowledgments
Having a complete onboarding process creates a professional first impression.
8. Create Job Descriptions
A clear job description benefits both the employer and employee.
It should include:
Essential duties
Required qualifications
Physical requirements (if applicable)
Work schedule
Reporting relationships
Performance expectations
Job descriptions also support recruiting, performance evaluations, and compliance.
9. Understand Employment Laws
Even businesses with one employee must comply with numerous employment laws.
Areas to understand include:
Wage and hour laws
Overtime requirements
Anti-discrimination laws
Workplace safety
Recordkeeping requirements
Leave laws that may apply
Staying informed helps protect your business from costly mistakes.
10. Build Your HR Foundation
Hiring your first employee is about more than filling a position—it’s about building your company.
Establish processes for:
Performance reviews
Employee documentation
Training
Communication
Payroll
Compliance
Workplace policies
Creating these systems early makes growth much easier as your team expands.
Don’t Wait Until Problems Arise
Many business owners focus on hiring quickly and deal with HR later. Unfortunately, that often leads to compliance issues, inconsistent practices, and unnecessary stress.
Taking time to build a strong HR foundation before hiring your first employee can save thousands of dollars and countless hours down the road.
HR Transformation, LLC Can Help
Hiring your first employee doesn’t have to be overwhelming. At HR Transformation, LLC, we help businesses establish the systems they need to hire with confidence.
Our services include:
Payroll setup
Employee handbooks
HR policies
Hiring and onboarding
I-9 and E-Verify compliance
Background checks
Job descriptions
HR compliance audits
Ongoing HR support
Whether you’re hiring your first employee or your fiftieth, we’ll help ensure your business is prepared for success.
HR Transformation, LLC
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