One of the most common questions small business owners ask is: can a single-member LLC hire employees? The simple answer is yes. Even if you own your LLC alone, you still have the legal right to hire full-time or part-time employees to help grow your business. However, there are specific legal, tax, and compliance requirements you must follow when moving from a one-person operation to an employer.
The Difference Between Contractors and Employees
Many business owners confuse the rules for hiring independent contractors with the rules for hiring employees. A single–member LLC can work with both, but the responsibilities are different:
- Employees: You must withhold federal and state income taxes, pay Social Security and Medicare contributions, and comply with labor laws.
- Independent Contractors: They manage their own taxes and benefits, and you simply issue a Form 1099-NEC if payments exceed $600.
👉 Read our full guide on single–member LLC independent contractors to understand the difference before deciding which is best for your business.
Legal Requirements for Hiring Employees in a Single-Member LLC
If you decide to hire employees, here are the main steps:
- Get an EIN (Employer Identification Number) from the IRS.
- Register with your state labor department for unemployment insurance and other local requirements.
- Set up payroll to withhold and remit taxes properly.
- Follow labor laws including minimum wage, overtime, and anti-discrimination regulations.
- Obtain workers’ compensation insurance, required in most states.
Failing to meet these requirements could lead to fines and penalties.
Tax Implications of Hiring Employees
When a single–member LLC hires employees, it changes how taxes are handled:
- You are responsible for withholding employee taxes (federal, state, Social Security, Medicare).
- You must pay the employer’s share of Social Security and Medicare taxes.
- Payroll expenses, salaries, and benefits are deductible business expenses, reducing your LLC’s taxable income.
Unlike hiring independent contractors, where tax responsibilities are lighter, hiring employees comes with more compliance but can offer long-term stability for your business.
Advantages of Hiring Employees as a Single-Member LLC
While some entrepreneurs prefer contractors, hiring employees has major advantages:
- Long-term commitment: Employees are more invested in the growth of your company.
- Better control: You decide when, how, and where the work is done.
- Company culture: Building a team allows you to create a company identity and loyalty.
This is why many businesses start with contractors but eventually hire employees once they reach a stable growth stage.
Risks and Challenges
Even though a single-member LLC can hire employees, there are challenges:
- Higher costs due to payroll taxes, insurance, and benefits.
- Legal compliance can be complex, especially with multi-state regulations.
- Administrative work increases because of payroll and HR responsibilities.
For some businesses, it may still be more efficient to work with contractors, freelancers, or consultants.
Can a Single-Member LLC Have Both Employees and Contractors?
Yes. Many LLC owners use a mix of employees and contractors depending on the type of work needed. For example:
- Employees handle core business tasks requiring ongoing commitment.
- Contractors are used for specialized projects or seasonal demand.
This hybrid model allows for flexibility while maintaining long-term growth.
Final Thoughts
So, can a single-member LLC hire employees? Absolutely. As the sole owner, you are allowed to employ staff, but you must follow all federal and state employment regulations. We recommend starting with a clear HR and payroll plan, consulting with an accountant, and ensuring compliance with IRS rules.
At the same time, don’t forget that a single-member LLC can also hire independent contractors—which might be the better choice if you want flexibility and lower costs in the early stages. By balancing both options, you can scale your LLC efficiently and legally.