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First time with employees

Discussion in 'Business Operations' started by lawnspecialties, Jan 13, 2006.

  1. lawnspecialties

    lawnspecialties LawnSite Silver Member
    Messages: 2,522

    I'll bet this has been discussed quite a bit; please forgive me. I've been a sole proprietor for over six years by myself. It looks like this year I'll have to hire my first employee. Where do I start with all the legalities?
    1: Worker's comp: do I need it for just one employee?
    2: Medical insurance: what's the laws on that these days?
    3: How do I verify he's a legal citizen?
    4: How do I handle the pay? (taxes, soc.security, etc.)
    5: Should I incorporate?
    6: Anything else I might not have thought of?

    Thanks for any help, gentlemen.
  2. dcondon

    dcondon LawnSite Silver Member
    Messages: 2,246

    I will try and help you out.

    1: YES you need Worker's comp
    2: no on medical
    3: Drivers License
  3. dcondon

    dcondon LawnSite Silver Member
    Messages: 2,246

    4: ask for some help
    6: Do you have ins for the Co??? Thats a must these days. don't forget nice uniforms also.:waving:
  4. mtdman

    mtdman LawnSite Gold Member
    Messages: 3,139

    1 depends on your state's laws. Here if they aren't full time you aren't required to have it.
    2 No
    3 Driver's license and SS card. Have to make copies of both.
    4 Best bet is to get someone to do it for you. I use quick book's payroll service.
    5 Up to you
  5. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Messages: 7,547

    Workers comp is a state issue, probably dont need it with 1 employee. Order publication 15 off the irs website, or call them. It is very simple to do. If you have the ablilty to read a calender and operate a calculator you can do it yourself.
  6. MMLawn

    MMLawn LawnSite Gold Member
    Messages: 3,569

    You are in NC and I know the laws here pretty well, so...

    1: Worker's comp: do I need it for just one employee?

    NO, not legally in NC if you have less than 3 employees. However this is a dangerous field of employment so for your own financial safety you may want it anyway.

    2: Medical insurance: what's the laws on that these days?

    Not required for you to carry at all. Most small businesses with very few employees do not carry it, just too costly.

    3: How do I verify he's a legal citizen?

    SS Card and NC Drivers License/ID Card

    4: How do I handle the pay? (taxes, soc.security, etc.)

    Remember to be an employer in NC you MUST register with the IRS and the State Dept of Revenue and get EIN's from each of them. You in turn will have to pay your federal employee taxes and FICA (employees part and your part as the employer) via your bank on the 15th of each month and the State employee taxes each Quarter (again both parts). It is very easy to do and keep up with through Quickbooks, but if you have no such experience I would recommend you use either a payroll service or a CPA.

    5: Should I incorporate?

    You certainly don't have too. But if you have a lot of paid for personal property (real property, i.e.house(s), real estate) then you will want too to protect it from suits and liens should something go wrong. If you do not have personal property to protect then you would do better tax wise to stay a SP.

    6: Anything else I might not have thought of?

    Probably, but it's late and I can't think clearly.. :laugh:
  7. lawnspecialties

    lawnspecialties LawnSite Silver Member
    Messages: 2,522

    Thanks to everyone. Yes dcondon, I do have liability ins. combined with theft and fire. I have an acct. handle all my taxes so I'll get with them soon. They're really good people who'll either help me or steer me in the right direction if they can't. Thanks again.
  8. retrieverlawncare

    retrieverlawncare LawnSite Member
    Messages: 19

    Best advice I can give you............

  9. retrieverlawncare

    retrieverlawncare LawnSite Member
    Messages: 19


    I hired my first employees last year....and it is not as difficult as it may seem to do this and do it legally.

    I did get the help of my accountant and it cost me about $200 to get everything set up and now as I add employees I can do everything myself and I know what to do.

    SOme answers to your quewstiosn:

    1) I think it depends on the State, but, for the most part YES you will need workers comp for your employees.....and it would be foolish not to have it anyway. Costs me about 8% of payroll in Maryland for workers comp to give you an idea of cost.

    2) You don't have to offer medical insurance to employees

    3) Usually (2) forms of I.D like drivers licence, social security card, etc. You will want to make copies of these I.D.'s to cover your a$$.

    4) Taxes are not that hard....but, you will want an accountant to do the first QUarterly filings for you so you can learn how easy it is and the right way to do it.

    Now, you will have to pay 7.5% of employee wages to social security and also unemployment insurance (federal and state).....around 2-3% of employee paytroll

    So, your total tax burden on an employee could be approximately 18-25% ABOVE the wage you pay them:

    WOrkers Comp: approx 8%
    SS Tax: 7.5%
    Unemploy: 2-3%

    So lets say you are paying an employee $10 per hour....then in reality by the time you pay your share of taxes that employee will cost you around $12.00 per hour.

    5) Incorporating is up to you.....talk to an accountant. I formed a Limited Liability Company tin order to protect my personal assets should my buisiness be sued. Very easy to form LLC........cost me about $300 in Maryland.

    6) Don't forget, an employee will cost you $12.00 per hour while he is on the clock. You will only get about 75% efficiency out of anemployee......due to "dead time" driving between jobs. SO you need to take that into account by dividing the $12 by 0.75 to get a real "cost" per hour of billable time for an employee. SO an employee actually costs you $16.00 per hour of billable time in this example.

    Hope this helps!
  10. out4now

    out4now LawnSite Bronze Member
    from AZ
    Messages: 1,796

    Depending on your state they may issue drivers lic/ID cards to illegal aliens so that doesn't count for citizen proof unless the congressional bills metioned in this article have passed. I had heard about this before in our state and I always had thought it was a given as well but I looked it up. You'll have to check with your local regulatory agencies and yes hire an accountant. http://usgovinfo.about.com/library/weekly/aa091902a.htm

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