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3 Factors To Consider Before Hiring Your First Employee [Guest Post]

Sep 16, 2010

Posted by Kristin Oberlander - As an NASE Member, you have access to discounts on incorporation services and DBA registration through BizFilings. If you have questions about whether or not to take on a new employee, our guest blogger, Julie Henningfield, offers some pointers to help you decide. Remember to consult with our small business experts at ShopTalk if you have any additional questions!

Self-employment cultivates independence, pride and control. But when the workload gets to be too burdensome, you may start to think bringing someone else on board isn’t such a bad idea.

One of the first things you need to ask yourself is if you really need someone else to share in the workload or if you just need to organize your tasks more efficiently. If the lack of organizational skills is the root of the problem, consider looking into seminars and libraries for information on time management.

However, if it’s determined that you need to add staff to accommodate your company’s growing pains, then you need to consider other criteria.

Here are three questions to consider in making the decision to add on staff:

  1. Can you afford an employee? Even though you’ve come to the realization that an extra set of hands is necessary for your company’s growth, you still need to figure out if you can really afford an employee. You don’t want to defeat your goals by draining your company’s budget. Factor your operating budget, your obligation to pay at least the minimum hourly wage and your legal obligation to cover employee benefits into the equation. Try to estimate how much wiggle room you have with your finances in paying an extra person. It’s also important to look at other ways an employee can help generate additional income. If another employee opens up more time to you to market your business or increase productivity, the investment may be well worth it.
  2. Will a full-time employee, part-time or temporary help satisfy your needs? There are plenty of advantages to taking on a full-time employee. You can groom this employee to learn the ropes according to your vision. You will also have the advantage of having someone in place to “mind the store” when you need to satisfy other obligations. The disadvantages of hiring a full-time person include the matters of payroll taxes, federal and state employment laws as well as insurance. Formulating this decision should be based on what your long-term goals are as well as what you can afford. 
  3. Is it time to incorporate? Deciding to hire an employee may also be the tipping point for you to incorporate your business. Company growth unfortunately also generates risks. The more you have, the more you have to lose. Incorporation adds that extra layer of protection needed when there’s more at stake. As a corporation owner, you can reap the rewards of limited liability protection so creditors can’t pursue your home or car to pay business debts. Incorporation may also entitle you to write off things such as health insurance premiums.

Of course, these are only a few things to consider when taking on the title of “boss.”

To learn more about hiring your first employee, visit IRS.gov.

Have you hired your first employee? What advice would you give to small business owners making this decision?

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