Hiring your first employee – part 3

This is the final installment of “Hiring your first employee” which began on Monday of this week.

Hiring even one employee (the first is the hardest) puts a paperwork burden on the business owner. It also requires budgeting more money than just the base pay. At a minimum, the employer is responsible for paying the employer’s portion of Social Security and Medicare insurance, and paying for workers compensation and unemployment insurance.

The employer is responsible for depositing withheld taxes in a timely fashion or risk large penalties and interest.

So, many business owners ask me, why not just hire the employees as independent contractors and avoid the paperwork and additional costs?

This may be a good idea if the individuals really do qualify as independent contractors. A partial list of qualifications includes: the person can work his/her own hours; the person is free to contract with other businesses; the person provides his/her own tools – such as computers. If you hire an individual to work as a “1099″ employee, be prepared to justify to the IRS that the person qualifies as an independent contractor. (1099 is the form on which annual payments to an independent contractor are reported).

A person you contract with to fix your computer, or install your phone system, or even comes in once a week to do your billing will probably fall into the independent contractor category. Someone who works part time but for whom you set the regular work times and hours, and who must work at your facility using your equipment, probably will not qualify as an independent contractor.

It does not pay to short-cut the process and call what should be an employee an independent contractor.

Please note that I am not qualified to give legal or tax advice. You should check with your legal and tax authorities before making a move to add a regular or 1099 employee to your staff.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com
will@limkemann.net

Business Success Factors

Starting a business is easy. Making it successful and lasting is not. Unfortunately, up to 80 percent of businesses fail.

I often ponder why some innovative new businesses succeed – or even thrive, while others fail? What I have discovered is that success has little to do with education or even the number of hours at work. Successful business owners typically have a well-articulated vision for the business, have specific and attainable goals, and have a written business plan.

These owners also have priorities for how they spend their time and money. They focus their attention on products, services, employees, and markets. They are continually examining their costs, creating new products and services, improving quality, training employees, pleasing customers, and developing new markets.

So if you are running a business or contemplating starting a business, take to heart what successful business owners have learned.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com