Can an LLC Have Employees?
Your LLC can always have employees regardless of the number of members or whether your LLC is member-managed or manager-managed. Employees need not be members themselves, though members may be employees if they would like. Before you hire any employees, though, ensure that the two necessary requirements are fulfilled.
An employee is legally defined as any individual hired for a wage, salary, fee or payment to perform work for an employer. Employees are distinct from independent contractors. This distinction is important when determining whether certain laws apply to the business — some laws only take effect when a company has more than a set number of employees — whether an individual is eligible for worker’s compensation, and whether the limited liability company will be liable for damages caused by the individual.
Your company’s limited liability protections will not be extended to any employees, but the LLC will still receive limited liability for damages an employee causes. This only means that the members will not be personally liable for an employee’s damages; the LLC itself will still be liable.
Requirements for an LLC to Have Employees
In order to hire employees, a limited liability company must have an Employer Identification Number or EIN. The process of applying for an EIN is straightforward, but you could hire an attorney or accountant for assistance if necessary.
Your state may also require you to register as an employer on top of the other registrations you filed for becoming an LLC. This is typically for taxation purposes, but may also extend to certain yearly filing requirements or statutory compliance reports. Consult your state’s income tax division or Secretary of State to find out if employer registration is necessary.
Although limited liability company members are considered self-employed for IRS purposes, LLC employees are not. Your must file returns and pay payroll tax just like any other type of business entity that hired employees.