How to Plan Your First 5 Hires for a U.S. Business or LLC

Hiring first employees works best when you plan each hire around the work your business needs done, not a standard list of job titles. To plan your first five hires, map out the weekly work, identify the one constraint holding your business back, and hire only when a measurable signal indicates the need is sustained. Decide whether each task needs an employee, a contractor, or software, and set up U.S. payroll basics, starting with your EIN, before the first paycheck.

This is important because moving from founder-only status to employer status is a significant change. The U.S. Small Business Administration Office of Advocacy’s 2024 report states that there were over 34.7 million small businesses in the U.S. Of these, 81.9% had no employees, and 18.1% had paid employees.

Map the Work Your Business Needs Done Before Writing Job Descriptions

Before writing a job description, make a list of the things your business needs to get done in a week. This usually includes sales, delivery, and everything in between, such as payment collection and processing, as well as administration. Then decide whether each task can be done only by the founder, an employee, a specialist, or software.

By doing this, the question changes. Instead of “we probably need an operations manager,” you may learn the real issue is 25 hours of order administration each week. Or the founder may think the company needs a salesperson when the real constraint is delivery capacity, and winning more business wouldn’t help if the current business can’t be served.

Thinking about a business in terms of the functions it performs also facilitates long-term workforce planning for a small company. You can begin with the work the business performs today, and then consider what functions it will require as the business evolves into a larger operation with increased revenue and a greater volume and complexity of customers.

Track Where Your Time Goes to Find Tasks Worth Handing Off

Many founders are aware that they are busy but unclear about the reasons for their busyness. For two to four weeks, track your time by breaking it down into broad categories: sales, delivery, support, admin, finance, marketing, product, and recruiting.

Then think about which of those functions require the founder. A founder may work 55 hours a week. Of those 55 hours, 15 may be spent on customer emails, document prep, and invoicing. If someone else does that prep and invoicing, the founder may get 10 hours back to spend on sales and/or product decisions and/or partnerships.

Founder time has an opportunity cost. From an opportunity-cost perspective, a $30-an-hour function may seem like an expensive delegation of work, but that work may cost more than it is worth if the founder could generate more revenue by spending that time on sales and/or other productive activities.

Distinguish Revenue Constraints From Delivery Constraints

There are usually two types of problems that drive the need to hire early on, and they often point in opposite directions.

Revenue Constraints

There are issues around attracting, selling to, or onboarding enough customers, and help is often brought in around sales, marketing, lead generation, or account management to alleviate these constraints.

Delivery Constraints

Although demand for the company’s product or service exists, the ability to fulfill this is becoming a constraint. Help around operations, production, engineering, customer service, and administration is often brought in to address this.

If you are not able to find customers, bringing on another delivery employee creates idle capacity. If you are unable to fulfill orders, bringing on another sales employee will only make the situation worse. Which single constraint, if removed, would benefit the company most over the next 90 days? What are the biggest constraints on revenue, customer experience, and capacity for the founder? Addressing this will help determine what to hire next.

Employee, Contractor, or Software: Choosing the Right Way to Get the Work Done

Not every role needs to be filled with a W-2 employee. A significant portion of the U.S. workforce consists of contractors, according to Upwork’s Future Workforce Index. The index stated that 28% of the U.S. skilled knowledge workers are freelancers and independent professionals. Further, that index estimated that skilled freelance knowledge work generated around $1.5 trillion in earnings in 2024. As a marketplace company, Upwork tends to focus on the freelance workforce, so these stats are worth considering for an industry survey.

As a general rule, roles that are project-based, variable, or too small to warrant a full-time position tend to be good contractor roles, e.g., tax prep, bookkeeping, design work, legal work, paid advertising, copywriting, etc. Ongoing work, especially core work that’s central to the business, tends to be a better fit for a role that’s filled by an employee.

Employee vs. Contractor is a cost consideration in the U.S., but worker status is determined by the control you exercise over the means of production, not by the contract language. The IRS provides information on the differences between employees and independent contractors. Consider reviewing it before engaging someone as an independent contractor. Misclassification can result in a back tax situation.

If you have just formed an LLC, this checklist on what to do afterward also covers the employee-versus-contractor decision.

Consider All Expenses Attached to Each New Employee

When budgeting for new employees, you need to account for more than just their salary. You also need to include:

• Employer payroll taxes
• Benefits
• Recruiting costs
• Equipment and software
• Training
• Workspace

Once you have accounted for these expenses, you need to determine how much value the employee will create. Will they help reduce the number of hours founders waste on routine tasks? Will they help serve more customers? Will they help decrease the number of order delays? For each new employee you hire, you should be able to justify their value by explaining what the company would lose if they weren’t hired. A good way to check this is to determine what would happen if you didn’t hire this person in the next 12 months.

Clean financial records make it much easier to track these costs once the hire starts.

Set Up the Basics of Being a U.S. Employer Before Issuing the First Paycheck

When you make your first hire in the U.S., you will have to complete various federal and state forms. Both of these will ask you to provide various pieces of identification, and it is best practice to check these against the most current IRS and state agency publications to ensure you provide the correct information.

At the federal level, you will need to apply for an Employer Identification Number (EIN), collect a Form W-4 from each employee, verify employment eligibility with a Form I-9, and set up a system to withhold and pay payroll taxes. The state will have additional forms and rules for you to follow, including perhaps withholding and paying state payroll taxes. Most states will require you to register to report new hires and to report and pay unemployment insurance taxes.

Founders outside the U.S. can run a U.S. LLC and hire employees in the U.S. However, the IRS requires that an applicant for an EIN have a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). So, if you don’t have either of those, you would have to apply by fax, mail, or telephone. And if you apply by those means, it’ll take longer to process your EIN application.

So, if you plan to start your business on a certain date, you should begin the EIN application process well in advance. A tax professional can help you understand how your LLC’s ownership structure affects payroll.

Use Measurable Hiring Triggers Instead of Calendar Dates

If you want to hire employee number two in June and employee number three in August, that’s great. But unexpected things happen, and steady-state growth is rare. Set hiring rules based on thresholds. Here are some example triggers. Set your own thresholds from your own figures.

• The administrative burden on founders exceeds the 12-hour-per-week threshold for four consecutive weeks.
• Customer response times exceed your targets.
• Production capacity stays at 85% for two months.
• Monthly recurring revenue exceeds the cost-of-role threshold.
• A new regulation requires skills your team doesn’t have.
• You’ve been paying a contractor enough that bringing the work in-house crosses the threshold.

Hiring rules can shift the focus of workforce planning from the exact number of employees needed to triggers that indicate a need for additional capacity.

How to Sequence Your First Five Hires

Hire 1: The Biggest Bottleneck

Identify a problem that repeatedly constrains the company. Then, assign the mission to improve that situation. By defining the mission so narrowly, both sides of the equation can know if things are moving in the right direction.

Hire 2: The Next Constraint

As the first hire is made, the constraint moves. As delivery capacity improves, the constraint could move to sales.

Hire 3: Clarifying Ownership

Informal agreements can work for a while, but a lack of clear ownership becomes costly. This hire will often formalize arrangements to the extent that one function finally has a person accountable for results.

Hire 4: Anticipating Demand

Looking back over the previous 6-12 months, a trend may have emerged indicating a need to hire before demand materializes. Such as an anticipated increase in service offerings, expansion into new markets, or an uptick in sales and the corresponding need for additional employees.

Labor market data shows why flexibility is essential. The U.S. Bureau of Labor Statistics reported that firms with fewer than 250 employees made up 51% of net U.S. job creation from the third quarter of 2020 to the third quarter of 2025. However, in the third quarter of 2025, those firms experienced a net loss of 213,000 jobs.

Hire Five: Reassess the Whole Team

For a five-person company, ask what the founder still does that should be owned by someone else, where the team is overloaded or idle, and what skills the next stage of the company will require. The World Economic Forum’s Future of Jobs Report 2025 projected that by 2030, the core skills of 39% of workers would change. The report also showed that 70% of the surveyed employers expected to hire people with the new skills, and 85% expected to prioritize upskilling their current employees.

This doesn’t mean a five-person company should project what every future job will look like. It means the company shouldn’t assume what’s on today’s to-do list will still be the case tomorrow.

Use a Hiring Scorecard to Justify Each New Hire

Write down the bottleneck, the work to be transferred, the trigger, the employment model, the full annual cost, the expected business impact, the 90-180-day success measure, and the alternative (automate, outsource, or delay) for each new hire. Review the scorecard for each new hire.

Businesses are constantly evolving, especially young businesses. In the last quarter of 2025, the Bureau of Labor Statistics recorded 338,000 new establishment births, representing 1,000,000 new jobs. In the same quarter, firms with 1-49 employees posted a net employment increase of 194,000 jobs.

Final Takeaways: Match Each Hire to a Real Constraint and Set Up Payroll First

Locate the real constraint and decide between employee, contractor, or software. Set the full cost and measurable triggers. Finally, ensure the U.S. employer basics, starting with your EIN, are set prior to the first pay.

Before each new hire, the business needs to determine whether the employment capacity is warranted. The SBA Office of Advocacy reports in its 2024 report that small businesses (fewer than 500 employees) employ about 59 million people, representing 45.9% of private-sector employment in the United States.