Turning a self employed individual into a company owner begins by hiring your first employee. Being self-employed comes in a variety of flavors. There’s the freelancer, independent contractor, temporary worker, hobbyist, and independent business owner.
Self-employed individuals provide services in many industries and are able to do the work pretty much on their own. However, without the owner, the business ceases to exist. To turn a self employed business into a company requires a team of people.
Examples from my first companies
- My first business was as a sole proprietor or self-employed. I was a grant writer and worked for individual non-profit organizations. The company fell and rose with me.
- My next business provided building repair services. In the beginning, it was just me and a few subs. Then customer demand expanded beyond my ability to keep up and forced me to hire temp workers and expand my subcontractor base. But everything still relied on my guidance to keep things going.
- My third business was providing building inspections and environmental site assessments. Yet, this company couldn’t exist without expanding my professional team. This meant hiring employees and supporting payroll etc. After building a great team, I could leave for a few months and come back with the company still humming along.
Hiring your first employee – things to consider
When hiring your first employee – take into account both the monetary cost and the human capital cost.
- The monetary costs include – processing of payroll, insurance & wage requirements, overtime pay, fringe benefits etc.
- The human capital includes – how they interact with other employees and customers, does their skills and talents meet your requirements, times for training, management and supervisory requirements as well as various industry regulations and laws regarding employer/employee relationships.
The above questions can only be answered by your unique needs.
Questions for hiring your first employee
My interviews always started with these two questions.
- How can you make the company look good?
- How can you make me money?
These may sound arrogant and abrupt. But honestly, the only reason to own a company is to fulfill customers needs and make money. It’s hard to stay in business if your company looks bad and is run unprofessional. And if we look bad, and don’t perform to customers expectations, a business will stop making money. So, to keep things simple, I opted for the abrupt approach.
Hiring your first employee – Hire a hourly consultant
Due to the highly litigious nature of countries like the US, I recommend paying for an initial consultation in 3 areas.
Tip 1. Payroll processor:
Payroll may sound easy. But the rules and filing process that govern payroll are not. Hiring someone to process payroll is cheap. When compared to the hours of frustration we will spend doing it by yourself.
Tip 2. Accountant or Tax Professional:
Most self-employed people have made their own way using various business accounting programs like QuickBooks, or Peachtree, but things will change quickly when we take on real employees. So do yourself a favor come tax season, or before your first audit, and get professional advice. Then decide if you’re able to go it on your own, or need to hire an accountant and/or tax service.
Tip 3. Attorney serving your industry:
We may have been able to wing-it or skirt the law working alone, but with employees it’s not so easy. Make a list of all the questions regarding potential liability and lawsuits you might face in your business. Then Look over various job application forms and employee contracts. After you find the contract and application you like, hire an attorney. Don’t be cheap in this area. Because lawsuits and employee disputes won’t be. Also have them look over your work proposals or bid process before you sign on the dotted line.
As new business owners, there are a lot of hurdles. And hiring our first employee shouldn’t be one of them. For more Payroll advice and hiring new employees visit our Small Business Sixth Step, and for more on human resources visit our new 4 Steps for Better Human Resource Planning.