Hiring Employees in Texas LLC – Wages, Laws, Compliance Guide

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Any business structure or corporation stands firm on its foundation laid by the employees. An LLC is no exception to this rule. Hiring employees in your LLC comes with some rules, regulations. Before understanding the rules of hiring employees in Texas LLC, we must understand what an LLC means.

A Limited Liability Company is a business structure that protects the owners from any personal responsibility of the debts or liabilities arising out of the LLC. If an employee action succeeds to liabilities, the owners get the protection against it. LLCs are a combination of the characteristics of a partnership firm & a sole proprietorship. 

Hiring Employees in Texas

In order to hire employees in LLC in Texas, there are many requirements that a business has to fulfill. One should keep these points in mind while hiring employees in an LLC. These requirements include:

1. Federal & State Employment posters in Texas

The employers in Texas are required to show both Federal & State Employment posters mentioned in Equal Employment Opportunities Act, Americans with Disabilities Act, Fair Labour Standards Act (FLSA),  etc. You should seek professional help to fulfill all the norms or requirements.

2. Federal & State Required Forms

Hiring employees is a lengthier process that involves the filing of different forms & applications. Suppose you wish to hire employees in Texas. In that case, you must ask your employees to submit the Employment Eligibility Form, the Federal Tax withholding form, the W-4 Form, Workers Compensation Claim Form, Disability Self- Identification Form, U.S. Citizenship and Immigration Services Form, etc. These Legal forms are easy and free to download.

3. Requirements of Texas New Hire Reporting program

Employers of Business owners are bound by Texas’s New Hire Reporting Program, under which they have to submit a report consisting:

  • Company Name
  • Company Address
  • Company federal tax ID number
  • Employee’s Name
  • Employee’s Social Security Number
  • Employee’s Address
  • First Day of paid Work

In addition to the forms mentioned above, payments, taxes, tax forms, & requirements, there may be some additional compliance for hiring in Texas (specifically); you must adhere to those norms as well.

Can an LLC Hire Employees?

An LLC or a Limited Liability Company can be regarded as a corporation, partnership, or sole owner business. The owners of the LLC are often referred to as members. Individuals, Corporations &, in some cases, other LLCs can form an LLC as members.

The members form LLCs because of their limited or no liability provided to the owners or members. In the event of liabilities arising out of an employee’s action, the members of the LLC are not personally liable- the LLC is liable for the actionable claim.

Any LLC (even one with a single owner) can hire unlimited employees on wages or salary. (The single-member owner LLC may have different rules and regulations). In addition to the salaried employees, the LLC can appoint Independent contractors for certain tasks on a contract basis. 

Rules to Hire Employees in an LLC in Texas?

Just like any other business corporation, an LLC is also not immune from certain procedures & rules of hiring. An LLC files many documents & pays a number of taxes to various Government Agencies while hiring employees. Some of the essential rules or steps to hire employees in an LLC are:

  • Federal Employer Identification Number – Every LLC must obtain an Employer Identification Number (EIN) from the Internal Revenue Service. EIN helps report taxes & a few other documents to the IRS.
  • Employee Eligibility Form – It is mandatory for an LLC owner to check if the employee is eligible for employment in the U.S. An LLC has to ask the employees to submit the I-9, Employment Eligibility Verification Form to verify the identity of the employee & to authorize the employment. the I-9 form is a mandatory requirement while hiring an employee.
  • Employee’s Social Security Number – The employee has to have a valid Social Security Number (SSN) to work. LLCs have to ask the new employees to submit their SSN before employment. The SSN is helpful in payment & tax purposes.
  • Setting up a process for collection & payment of the appropriate taxes – There has to be a due process for the employees’ future collection & payment of taxes. This process needs to be set up by the employer (in this case, the LLC)
  • Employee handbook – In the hiring process, one of the crucial elements of hiring paperwork is an Employee Handbook. Although it is not essential in Texas, it is usually needed as one of the legal documents in many other states. An Employee Handbook consists of a complete list of all the basic rules & policies of the company.
  • Texas payroll Taxes – An LLC that is running a business with employees or businesses with employees has to pay many federal taxes & state Taxes. Following the rules on payroll taxes is also an essential requirement.  After hiring employees, an LLC is subject to the State Unemployment Compensation Act. Under the said Act, an LLC will have to pay Unemployment tax to the state & to do that; the LLC must register itself with the Texas Workforce Commission. The process involves simple steps & can be completed in 20 minutes. 
    Payroll taxes also include Federal Income Tax withholding, an employer can withhold money from the employee’s account for the income tax.
  • Workers’ Compensation Insurance An LLC operating in the state of Texas has to carry workers’ compensation insurance & has to display relevant posters.
  • New Hire Report or Report of the New Employee – An LLC has to
    • Report about hiring the new employees in the form of “Report of New Employee(s)” to the Texas Workforce Commission (TWC) within 20 days from the date of hire.
    • Deposit and report federal employment taxes as per the IRS procedures for payroll reporting & payment.

Laws Relating to Wages of the Employee

The payment of wages, allowances paid to the employees, how many calendar days will be considered business days, employee benefits offered by the LLC, & the Labour Laws mostly govern many other employee policies. The minimum wages are prescribed under the Minimum Wages Act. 

  1. The current minimum wage in Texas is $7.25 (same as the Federal Minimum Wage Rate).
  2. Texas is bound by the Federal Minimum Wage Rate, which is decided in accordance with the Fair Labor Standards Act. TX Labor Code 62.051. The Fair Labor Standards Act governs almost all employers & employees. Texas does not have a specific Minimum Wage policy.
  3. According to the Texas Labor Laws & Fair Labor Standards Act (FLSA), businesses have to display an approved Minimum Wage Poster & other labor law posters, as prescribed by law, for informational purposes. 
  4. An LLC has to adhere to all the other responsibilities under Labor Laws regarding the minimum wages.

Structure of the Wages of the Employees

All company employees have a right to a Minimum Wage & other essential benefits. We have tried to jot down some of the important aspects of Minimum Wages in Texas.

Texas Overtime Minimum Wage 

The Texas State Overtime Minimum Wage rule states that every employee working for over 40 hours in a week is entitled to an overtime minimum wage – which is 1.5 times the regular minimum wage.

Suppose an employer fails to provide overtime minimum wage coverage for employees. In that case, the affected employee has the right to file an unpaid overtime claim with the Texas Department of Labor.

Texas Minimum Wage Exemptions

According to the Federal Fair Labor Standards Act, certain types of workers have different special minimum wage rates. An employee falling under any of the following categories shall be paid as per the Texas Minimum Wage Rule.

  1. Under 20 Minimum Wage: As per the Texas Minimum Wage rule, an employee who is below 20 years of age & is working in Texas has a right to receive a training wage of $4.25 per hour for the first 3 months (90 days of employment)
  2. Student Minimum Wage Rule: Full-time college or High School students often work part-time to earn money for their education. Such type of half-time employee has a right to earn $6.16 per hour as Student minimum wage.
  3. Tipped Minimum Wage Rule: All the employees working in Texas, who receive a certain amount as tips throughout the month, can be given a lower minimum wage. However, it is essential to make sure that they earn a minimum of $7.25 per hour – including the tips.

How to Hire Employees Fast in Your Texas LLC

To hire employees for your Texas LLC you need to verify if the person is eligible to work in the US and then report him/her as ‘new hires’ to the state.

Hiring employees is a good way to invigorate your business. However, if you’re not prepared, it can take you longer to hire your next employee than it should. If you’re just starting out, you should consider getting the right paperwork in order to ensure a smooth onboarding process.

First, it’s a good idea to create an organizational chart that includes the names, titles, and duties of your employees. This will help you to organize your employees in a way that makes the most sense to you and your employees. It’s also a good idea to include a job description for each of your employees.

Next, you’ll need to identify your business’s governing authority. For most businesses, this is the person who makes the decisions regarding how the business is run. You’ll also need to determine how to best pay your employees, including how to manage deductions and taxes.

The Texas Department of Labor and Workforce Commission has a plethora of resources that can help you with this task. These organizations offer educational materials on employment law, permits and forms. Depending on the size of your business, you may also want to consider hiring a consultant to help you with this task.

One of the best ways to find candidates is to post jobs online. Alternatively, you can look at postings at your local technical schools or career centers. A little bit of creativity can go a long way in finding the perfect applicant.

While there’s no foolproof method for hiring employees in Texas, the state has a number of regulations and rules to help guide you. Among the things you’ll need to do is get an Employer Identification Number (EIN), register for unemployment insurance, and show state and federal employment posters.

The IRS provides an easy to use Employer Identification Number (EIN) website where you can obtain a free nine-digit identification number. This is similar to a Social Security number for a corporation. When you have your EIN, you can open bank accounts, check your payroll, and even process your employee’s paychecks.

Other helpful tips to help you in your quest to hire employees include having an accurate, long-term record of your employee’s timesheets, ensuring they meet the legal minimum wage, and registering your business for unemployment insurance. Getting your business registered with the Texas Workforce Commission is also a good idea.

Finally, you should look into hiring a professional to handle your payroll. An experienced payroll service can help you to keep your records accurate and efficient.

Lastly, if you’re a new business, you should register as an employer at both the federal and state level. There are many federal tax requirements for employers. In Texas, you’ll need to be sure to cover the state’s minimum wage, along with Medicare and Social Security.

Luckily, the state of Texas has simplified its licensing process. Most businesses only need to make one or two additional filings in order to complete the process.

Texas Employee Rights

Here are some of the employee rights that any LLC in texas has to follow. Get the insights of these rights below,

Wage & Salary Rights

Every employee working in Texas has a right to fair & appropriate wages. Under Federal Law, employers have to pay the employees as per the Minimum WageStandards. Under Texas Minimum Wage Act, employers can’t pay salaries; that is below the Federal Minimum Wage levels.

Workers’ Compensation

In the event of an injury at the workplace, where the employee becomes incapable to perform normal job functions, he has a right to workers’ compensation benefits. Under workers’ compensation benefits, an employee gets paid for the portion of wages that were lost due to the injury at work. Workers’ compensation includes medical, burial, & death rights too if the injury at the workplace proves to be fatal.

Protection against Discrimination

No employer in Texas can discriminate against an employee on the basis of age, race, gender, origin, class, etc. The employees are protected under the Civil Rights Act of 1964 against any such discrimination.

Unemployment Rights

Any employee who has suffered a job loss “through no fault of his own” has a right to receive Unemployment benefits. These benefits are a monetary award offered to compensate the out-of-work employees until they rejoin.  

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