See that line outside the door? They aren’t waiting to buy tickets to a Ghostface Killah concert, nor are they waiting for the new iPhone. Those are clients. (Okay, the line is imaginary - but your business is booming). At a certain point, you’ll have to give in and hire support staff. However, it’s not as simple as putting up a job ad — there are a number of bureaucratic tasks that must first be completed.

  • Obtain an Employer Identification Number (EIN)

  • Taxes and Recordkeeping

  • Quarterly Tax Filings

Is this making your brain hurt? Ours too. Don’t despair. Taxes are a lot like learning a new practice area – once you’ve worked through it once or twice, it pretty much becomes second nature. Plus, with the right accounting software (or CPA), a lot of this is automated.

There isn’t much to say about an EIN. It’s basically the employer’s equivalent of a social security number and is used to track your taxes and other documentation with the IRS and federal and state governments. You can apply for this online, at the IRS website.

This is where that accounting and payroll system will pay for itself. According to the IRS, you are required to maintain tax information for at least the prior four years. In addition, you’ll have to handle tax withholding, W-2 forms for the employee and governments, and file your own taxes.

Employees or not, you’ll have to pay estimated taxes quarterly. If you’re solo, you have to estimate the self-employment tax. If you are required to withhold federal income, Medicare, and Social Security taxes, you’ll need to file IRS Form 941 quarterly.

Related Resources:

  • 5 Things You May Be Able to Deduct From Your Firm’s Tax Bill (FindLaw’s Strategist)
  • Small Firm Startup: Income and Self-Employment Taxes (FindLaw’s Strategist)
  • A ‘Taxing’ Way to Get Back at Deadbeat Clients (FindLaw’s Strategist)

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