A number of our clients have stated that they were unprepared as to the regulatory requirements and costs to starting a new business, especially as it relates to employees.  Here are a few of the key things you should know before starting your own company.

1. TAX IDENTIFICATION NUMBERS – Once your business is formed, you need to file to obtain a Federal Employer Identification Number (FEIN) from the IRS.  You will need this not only to file your corporate income tax returns, but also to submit employee withholding taxes.  Then you will also need to obtain a state tax withholding tax identification number and a state unemployment tax identification number.
2. EMPLOYER PAYROLL TAXES – While most payroll taxes are withheld from the employee’s pay check, there are a number of employer payroll taxes.  The IRS collects FICA Social Security and Medicare taxes from both the employer and employee.  Federal and state unemployment taxes are also paid by the company and the amount of tax is based on the number of employees and prior claims history.  Some states, such as NY, have additional employer payroll taxes.  In total, these employer taxes can be 8% to 10% of payroll, a cost that many entrepreneurs fail to consider.
3. EMPLOYEE BENEFITS – While there are no requirements for small businesses with less than 50 employees to provide benefits to their employees, these can often be a more powerful retention tool their salaries.  While initially new businesses may not focus on employee retention, they quickly learn the cost of high turnover with the time they spend to recruit, hire and train new employees, as well as the increase in unemployment taxes. 
4. EMPLOYEE  RECORD KEEPING – Work place regulations are designed to protect employees and create an administrative burden on companies.  Maintaining personnel files that support tax withholding elections, employment verification for I-9 and properly classify workers as exempt or non-exempt are just a few items that need to be maintained.  Payroll records, including support for each employee’s hours worked is also required.

The administrative burden of having employees can be daunting, time consuming and expensive.  However, failure to comply with department of labor and tax regulations can be even more expensive and noncompliance penalties and fines have forced many small businesses to close.  Luckily, there is a solution.  Outsourcing your payroll, benefit and other employee related functions can ensure that these are done correctly and since the outsourcing firm specializes in these services they can provide them at a lower cost than most companies can do themselves. 

So if you are thinking about starting a new business, or if you already did so but are just now planning on hiring your first employees, then now is the perfect time to contact Total Team Solutions.  For more than 30 years we have been helping small businesses grow by providing cost effective solutions for managing employees; from payroll, to employee benefits, to regulatory compliance and record keeping.  Contact John Morlock at 800-836-9678, ext. 5, or email at jmorlock@ttspro.com for more information on how Total Team Solutions can help you start your new business.