Mind Your Own Business: Ready to hire employees? Here's what to do

Mind Your Own Business: Ready to hire employees? Here's what to do

By JUDY EMERSON - Management Consultant, Nevada Small Business Development Center

Dear Judy: I'm a sole proprietor and my business has recently taken off. I think I need to hire some employees but don't know what I need to do. HELP! - Busy in Elko

Dear Busy: How exciting that your business is doing so well. Now the really exciting part starts - finding and hiring qualified employees. There are several different ways to go about finding people, and how you do that really depends on what you need. However, even as you are going through the hiring process, you still have a certain amount of paperwork you need to complete.

To this point, as a sole proprietorship, you have probably used your social security number as your taxpayer ID number.

But, sole proprietors who pay wages to one or more employees need to have a Federal Employer Identification Number. You apply for this number via IRS form SS-4 (found on the IRS website www.irs.gov/smallbiz) or you can reserve your EIN by calling toll-free 1-866-816-2065.

Next, any business that employs one or more workers is referred to as an “employing unit” and must register with the Nevada Unemployment Compensation Program. A new business is required to pay an amount equal to 2.95 percent of total payroll up to the taxable wage limit (currently $25,400), for 14-18 quarters. After that, you'll be assigned an “experience rating” depending on your experience with unemployment.

You send the Nevada Business Registration Form (the same form you used for the state business license) to the State of Nevada Employment Service - Employment Security Division Field Auditor, 500 East 3rd Street, Carson City, NV 89713 (775-684-3911). You are also required to pay a Federal Unemployment Tax at a rate of 0.8 percent for the first $7,000 of each employee's salary. This amounts to $56 per employee per year.

Also, any business that employs anyone must obtain workers' compensation insurance coverage through an insurance agency, unless that business is certified by the Commissioner of Insurance as a self-insured employer. Employer paid premiums are charged according to the classification of how hazardous the job may be.

Coverage must be obtained prior to hiring employees. Contact the insurance company you have your business insurance through to see if they provide this coverage. Most do since the deregulation of the State Industrial Insurance System of Nevada several years ago.

You are also required to pay the Modified Nevada Business Tax, which is based on gross payroll. For most businesses, payment of 0.63 percent of gross payroll will be reportable after deductions for health insurance benefits paid by the employer. Financial institutions are required to pay 2 percent of gross payroll after deductions for health benefits.

In addition, you must have your employees complete and sign Form I-9 (from the Immigration and Naturalization Service) and retain that information in the employees' file.

Then there's the question of withholding taxes from your employees' paychecks! Every employee hired is to complete a Form W-4 so that you can withhold the proper amount of income tax from each paycheck. You must also withhold Medicare and Social Security (1.45 percent and 6.2 percent respectively). It's important to remember, however, that you are just holding these dollars for the Federal Government, and you must file IRS Form 941 (Employer's Quarterly Tax Return) and pay these taxes quarterly. Don't withhold this money and then spend it on something else! Also remember, you have to match the FICA (Medicare and Social Security) amount of 7.65 percent.

This may seem like a lot of work to go through, but it is not difficult if you take care of the items one at a time. If you have any questions as you go through the process, you can consult with your bookkeeper or accountant, or, of course, you can some see me at the Small Business Development Center.