A one-man band can only play so many tunes.

In business, the same principle applies. You probably started your small business as a solo venture, but to grow it into a big corporation, you need to start building a team. This journey starts with hiring your first employee.

This is an exciting time. You’re genuinely looking forward to becoming an employer. However, there are things that can go wrong if you don’t make the right hire. Replacing a bad employee can costs you thousands of dollars.

To help you avoid unnecessary mistakes when making your first hire, we are sharing important things you must know.

Keep reading.

1. Ensure Your Business Is Tax-Ready

If you have been in business for a while, you’re certainly used to doing your own income taxes. As a sole proprietorship, there’s no requirement to file taxes for the business.

However, when you’re ready to hire your first employee, your obligations will change. Full-time employees must pay tax, and it’s your responsibility as an employer to withhold and remit those taxes.

This is why it’s super-important to obtain an employer identification number (EIN) from the Internal Revue Service.

In addition to federal tax obligations, you’ll also have to remit state unemployment taxes. As such, you need to register the business with your state’s labor department

So, how do you set up your business for payroll success? There are many tax codes you need to adhere to, which can be a bit difficult if you’ve no payroll experience.

A good hack is to use technology. This customizable check stub template, for example, can help you record your employee’s earnings. Full-fledged payroll software is also ideal, but at this stage in your business, it might be an unnecessary expense.

2. Know the Role You’re Filling

It’s not enough to know that you’re filling a certain position. You need to have a clear understanding of what the position does and how it will benefit your business.

If you’re hiring a digital marketer, for instance, you need to know the specifics of the job. What qualifications should the ideal candidate have? What’s the average salary for the position? Do you need them to be full-time or part-time?

The more you know about the position, the less likely it is to get the hiring wrong.

3. Advertise the Position Digitally

You’re ready to hire. But where do you find candidates?

You might want to place a “we are hiring” notice on your front door, but in the digital age, this isn’t likely to yield good results. You need to advertise the position on online job boards, LinkedIn, as well as on your website.

4. Purchase Workers’ Compensation Insurance

In most states, businesses with at least three employees must purchase workers’ comp insurance.

You have just one employee. Why is it necessary to purchase this policy?

Simple. Because on-the-job injuries can happen, and when they do, your business will need to compensate the employee for their healthcare expenses and other costs. Workers’ comp insurance will cover your liability.

Hiring Your First Employee: Get the Basics Right

Hiring your first employee is your first step to building a big team that will take your business to the next level. With these tips, you now know what you should do to prepare your small business for this process.