Step 4 - Employer Identification Numbers

10 Steps to Starting a Business

STAGE THREE – HIRING EMPLOYEES

Complying with Employer Requirements

This newsletter covers Stage Three of walking through the 10 Steps to Starting a Business.  Now that you have a legally formed business entity and all licenses and permits necessary to conduct business, the next step is hiring employees. 

The moment a business hires even one employee, it is subjected to an overwhelming barrage of government regulations and requirements.  And as discussed below, complying with the litany of Federal and State requirements relating to employees is by far the most complicated, convoluted, and burdensome aspect of setting up a business In California.  Therefore, it is imperative that any business wishing to hire employees put systems in place to ensure compliance with these laws. 

Accordingly, Stage Three, the largest of the four stages, provides a basic overview of the California’s employment laws, breaking down the process of complying with these laws into six steps (Steps 4 through 9):

STAGE ONE

1.       Business Formation

2.       Fictitious Name Statement

STAGE TWO

3.       Apply for Business Permits and Licenses

STAGE THREE

4.       Employer Identification Numbers

5.       Verify Employment Eligibility (Form I-9)

6.       New Hire Reporting Program

7.       Withholding Requirements

8.       Insurance Requirements

9.       Workplace Poster Requirements

STAGE 4

10.    Pay Taxes

Because Stage Three is the most complicated stage, each step within Stage Three will be discussed in its own individual newsletter, starting with Step 4 – Obtaining Employer Identification Numbers.  So without further ado…

4.   Employer Identification Numbers

The first step to hiring an employee is getting employment identification numbers for your business from both the Federal and State governments.

EIN (federal)

The Federal government requires employers to obtain an Employment Identification Number (EIN) by filing Form SS-4 with the U.S. Internal Revenue Service (IRS).  The EIN is necessary for reporting taxes and other documents to the IRS, as well as when reporting information about your employees to various State agencies.  To obtain an EIN, an employer can contact the IRS directly or apply online.  To learn more about obtaining an EIN, check out the IRS’s Guide to theEmployer Identification Number.

EAN (California)

Additionally, California requires employers to register for a California Employer Account Number (EAN), which is used for many of the same purposes as the Federal EIN (e.g. paying and reporting taxes, etc.).  California employers can register for their California EAN by contacting the California Employment Development Department (EDD) directly or by registering online through the EDD’s e-Services for Business.  To learn more about obtaining your California EAN, check out the EDD’s website.

After your business has obtained its Employment Identification Numbers, it is now ready to actually hire employees.  And once you hire an employee, you must verify that the person you hired is eligible to be employed.  Accordingly, stay tuned for Step 5, which discusses the requirement of Verifying Employment Eligibility…