Hiring Help Can Be Taxing For Small Firm
One of the major milestones in the career of any entrepreneur is the hiring of the firm’s first employee.
This rite of passage is significant because it usually marks the point at which a fledgling enterprise has achieved the stability and size where more hands are needed to seize the opportunities available to it.
Q. It’s time for me to bring on board my first employee, but I’m fearful that all the related paperwork and tax filings will impinge on the time I spend on company business. Right now the company demands 100 percent of my time. Any suggestions?
A. Your fears are well founded. An owner’s time is too valuable to be spent shuffling papers for a handful of employees. There’s a host of laws and regulations to be satisfied. The Fair Labor Standards Act determines the minimum wage and overtime provisions for employees. Social Security (FICA) and Medicare taxes must be withheld from workers pay, and you must match them. You’ll also have to pay Federal Unemployment Tax (FUTA). Be warned, there are some pretty stiff penalties for not depositing those taxes on time.
Your tax liability and the deposits you make to satisfy it have to be reported quarterly on IRS Form 941 (Employers Quarterly Federal Tax Return) and IRS Form 940 (Employer’s Annual Federal Unemployment Tax Return). Form 8109 is needed to deposit your FUTA taxes quarterly. To deposit these taxes you’ll need an Employer Identification Number. At the end of each year, you also have to issue an IRS Form W-2 (Wage and Tax Statement) to each employee, with copies to the government.
Until you achieve a sizeable work force and the ability to have some in-house administrative help, I’d suggest using a payroll service or “payrolling” your early employees.
A payroll service will prepare all of the paperwork that has to be generated and filed for your employees. You give the service pay rate hours-worked information every compensation period and it prepares the documentation for you to file.
The worker is actually your employee so you are responsible for completing all filings and payments. You also retain any liability that is associated with an employment relationship.
According to Paul Eastmer, president of Professional Support Inc. one of the pioneers in the employment service field, the best alternative for a small firm is “payrolling.” In this situation the worker is actually on the payroll of the employment service firm. It handles all the paperwork, pays the taxes, and juggles most worker-related problems. Since the people doing your work are actually on the service’s payroll, your unemployment insurance experience rating will not be adversely impacted if you terminate a worker. Often, the payrolling service will offer limited benefits to the employees it retains.
There is a fee for this service but it’s typically worth it, given the fact that it allows you to “buy back” some of your very valuable time.
For more information before you make your decision get a copy of Circular E, Employers Tax Guide at your local IRS office, and contact your state for similar information.
In a previous column we discussed the feasibility of trademarking a number to serve as a business name. In response, attorney Dick St. John, a partner at Wells, St. John et. al., E-mailed some specific info on using numbers.
He says that a number can be a trademark, as long as it is not descriptive of the product or its properties. A combination of numbers, he says, is capable of being protected and registered as a trademark, if you properly use the numbers to identify the source of your product and to distinguish your product from those of competitors.
Your numbers should be arbitrary and not identify the attributes of your product. The best rule to follow, he concludes, is to always use the symbol or word as an adjective and not as a noun; and always follow your mark with a descriptive word or phrase identifying your product. xxxx
The following fields overflowed: CREDIT = Paul Willax The Spokesman-Review