The moment you hire your first employee, you become an employer — and with that comes a set of legal obligations that exist regardless of how informal your business still feels. Getting the foundation right at employee one is far easier than trying to retrofit it at employee fifteen.
Employer Identification Number (EIN): Required for payroll tax purposes. Apply through the IRS — it takes minutes online.
State employer registration: Most states require registration as an employer before running payroll. Check your state's Department of Labor for requirements.
Workers' compensation insurance: Required in almost every state before you hire. The threshold and requirements vary by state.
Payroll system: Manual payroll is a compliance risk. Set up a payroll service before the first paycheck is due.
Offer letter: Written confirmation of role, compensation, start date, and at-will status.
I-9: Must be completed within three days of hire. Verify work authorization documents — do not accept documents that don't appear genuine.
W-4 and state withholding forms: Required for payroll tax withholding.
Employee handbook (or at minimum a policy document): At-will statement, code of conduct, harassment policy, and your key operational policies. It does not need to be comprehensive on day one — but it needs to exist.
Once the legal requirements are met, the HR work shifts to building the foundation: a clear onboarding plan for the new hire, documented expectations for the role, and a plan for how you will give feedback and have performance conversations. Starting these habits with the first employee makes them much easier to maintain as the team grows.
The best time to set up your HR foundation is before you need it. Every day of non-compliance is a day of exposure. An hour with an HR professional at the start of your hiring journey is worth far more than the equivalent time spent cleaning up problems later.
ValuedHR helps small and growing businesses build the HR systems they need without the overhead of a full-time hire.
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