Hiring a first employee changes what a business is, administratively, in about a week. Most of the change is documentary, most of it has a deadline, and the deadlines run from the start date rather than from whenever you get around to it.
Six items, in the order they become necessary. Details vary by state, and the state part is usually a phone call rather than a research project.
1. An employer identification number
The federal number that identifies the business as an employer. A sole proprietor may have been operating on a Social Security number until now, and that stops working the moment there is payroll.
The application is free and the number is issued immediately when applied for online through the IRS. Anyone charging you for this is charging you for a form you can complete in ten minutes.
Some states issue their own employer numbers for withholding and unemployment insurance, and those are separate registrations. Do all of them at once while you have the paperwork open.
2. Form I-9, completed on time
Employment eligibility verification, and the one with the tightest clock. Section one belongs to the employee and has to be finished by the end of their first day. Section two is yours, and you get three business days from the start date to complete it.
Two things people get wrong. The form is not sent anywhere: you keep it. And you must let the employee choose which acceptable documents to present rather than asking for a specific one, which is a rule about avoiding discrimination as much as about the form.
Keep I-9s in their own file, separate from personnel records, and keep them for the required retention period after someone leaves.
3. Form W-4 and its state counterpart
The withholding form that tells you how much federal income tax to take from each check. Most states with an income tax have their own version, and some accept the federal one.
Have it completed before the first payroll run rather than after. Without it you are required to withhold at a default rate, and correcting a first check is more work than collecting a form.
4. The new hire report
Every state runs a new hire directory, and employers are required to report each new employee within a short window, commonly twenty days. It exists mainly to support child support enforcement.
This is the requirement first-time employers most often miss entirely, because nothing about hiring prompts it. Most payroll services file it automatically, which is one of several reasons to use one from the first employee rather than the third.
5. Workers' compensation coverage
Almost no state permits an employer to go without this once somebody is on the payroll, and the employee-count thresholds and exemptions that do exist vary by state. It is not optional, it is not covered by your general liability policy, and operating without it where it is required carries penalties that are deliberately severe.
Get the quote before the start date. Premiums are based on payroll and on the classification code for the work, and the difference between classifications is large enough that it is worth confirming yours is correct rather than accepting the first code offered.
The certificate goes in the folder. Commercial customers will ask for it.
6. The required workplace notices
Federal and state law both require certain notices to be displayed where employees can see them: wage and hour, safety, unemployment insurance, and others depending on your state and industry.
These are free from the agencies that issue them and they are also sold, aggressively, by companies that mail official-looking demands for payment. You do not need to buy anything. The Department of Labor publishes the federal posters, and state labor departments publish theirs.
If you have remote employees, the requirement generally follows them, and electronic delivery is accepted in many cases.
What sits alongside the six
An offer letter stating pay, schedule, classification as exempt or non-exempt, and that employment is at will where applicable. It is not required. It prevents more disputes than anything else on this page.
A timekeeping method for non-exempt employees, because you are required to keep accurate records of hours worked, and reconstructing them later from memory satisfies nobody.
And a decision about payroll: a service costs a modest monthly amount, files the deposits on the right dates, and handles the quarterly returns. Payroll tax deposit deadlines are one of the few areas where a small business can create real penalties through simple lateness, and the fee is cheap next to that. The Small Business Administration, which supports firms at this size, sets out the sequence for a first hire in one place, and reading it once before the start date is a good use of half an hour.
The one decision that sits underneath all six
Whether the person is an employee at all. Everything on this page follows from that classification, and it is decided by the nature of the work rather than by what either party would prefer.
If you control the hours, direct how the work is done, supply the tools and expect the arrangement to continue indefinitely, that is employment, and the six items apply. Treating it as a contractor arrangement to avoid them creates a liability that grows quietly for years and surfaces in the worst way: an audit, or an injury to someone your policy does not cover.
Make that call deliberately, in writing, before the start date. Half an hour there removes years of exposure.
The folder that makes year two easy
One file per employee for personnel documents, one separate file for I-9s, one for anything medical, which has to be kept apart, and one for the business registrations and the insurance certificate.
Set that up on the first hire, when there is one of everything, and the tenth hire is a matter of putting papers in a place that already exists.