Hiring Employees as a Sole Proprietor
As a sole proprietor, you can hire employees. There is no limit to the number of workers you can employ. When you become an employer, you must withhold income tax for each employee and pay additional taxes.
Employee Expenses and Benefits
When you hire an employee, you may have to pay employee benefits or pay extra for office equipment and office space. Some costs for employees are not required for independent contractors.
Employer Responsibilities
As an employer, you are responsible for all employment administration, recordkeeping, and taxes, similar to any other employer. Certain local regulations may apply, but there are usually no limits on the number of employees a sole proprietorship can hire.
Before you hire employees, you need to get an employer identification number (EIN) from the IRS. Applying for an EIN is easy. You can instantly get one by applying on the IRS website. If you have time to wait, you can also apply by fax or mail. Employees must fill out all necessary employment forms, including Form W-4 and Form I-9. You might also have the employee fill out forms to receive benefits. After the employee begins working, you must withhold employment taxes from their wages.