The First American Hire: When a Business Becomes an Employer

Forming a company does not create an employment system

Registering an LLC or corporation, opening a bank account, and obtaining a federal Employer Identification Number do not, by themselves, complete the preparations for hiring staff.

The business must examine worker classification, authorization to work, withholding obligations, wage-and-hour requirements, and the rules of the state where the work will be performed. A Florida business and one employing someone in New Jersey may face different requirements concerning minimum wages, workers’ compensation, leave, reporting, and unemployment insurance.

A staffing plan therefore needs more than a table of expected headcount and monthly salaries. It should account for the legal and operational cost of being an employer.

Form I-9: a responsibility every U.S. employer should understand

One central federal obligation is to verify identity and authorization to work using Form I-9, Employment Eligibility Verification. Generally, U.S. employers must complete the form for new employees hired to work in the United States. It applies to U.S. citizens as well as noncitizens.

The employee must complete Section 1 no later than the first day of work for pay. The employer generally must complete Section 2 within three business days after the employee’s first day. If employment will last less than three business days, document examination and Section 2 must be completed on the first day. The current USCIS form instructions explain the requirements and applicable exceptions.

The form is not routinely sent to USCIS. The employer retains it and must be able to produce it for an authorized inspection. A visa, immigration status, and employment authorization are separate concepts. Lawful entry does not necessarily authorize work for a particular employer; some categories, conversely, provide employment authorization incident to status.

Verification uses the acceptable documents and procedures specified in the I-9 instructions, rather than assumptions based on citizenship, accent, or personal acquaintance.

Document examination is itself subject to legal limits

The worker generally chooses which acceptable documents to present: a qualifying List A document, or an appropriate combination from Lists B and C. An employer should not demand a green card, U.S. passport, or other specific document when an acceptable alternative has been provided.

Requesting additional documents or subjecting a person to different scrutiny because of national origin or citizenship status may violate anti-discrimination requirements. Compliance is not simply about avoiding unauthorized employment. It also means avoiding unlawful discrimination against authorized workers during verification.

E-Verify: an additional check, not a replacement

E-Verify allows participating employers to compare information from Form I-9 against government records, principally those of the Department of Homeland Security and the Social Security Administration. It does not replace Form I-9.

Participation is voluntary for many employers, but obligations may arise under state law, certain federal contracts, or other applicable requirements. The business location and circumstances must be examined rather than assuming that one participation rule applies nationwide.

Generally, the case must be created no later than the third business day after employment begins, after I-9 completion. E-Verify must not be used to prescreen applicants. A case may be created after a job offer has been accepted and Form I-9 completed, including before the first day of work.

An initial mismatch does not necessarily establish that an employee lacks work authorization. The prescribed resolution process and employee protections must be followed.

Can the examination be performed remotely?

Remote employment does not mean that an ordinary video call automatically replaces the required document examination. Since August 2023, an authorized alternative to physical examination has been available to qualifying employers, including those participating in E-Verify in good standing.

The alternative involves specific steps for obtaining and examining document copies, conducting a live video interaction, and retaining copies, with nondiscriminatory application of the procedure. Not every employer may simply choose camera-based verification. The DHS authorization and current instructions should be consulted before using the alternative.

Employee or independent contractor? The contract heading is not decisive

Founders seeking to control initial costs sometimes prefer independent contractors to employees. This can be legitimate when the real relationship supports that classification. Signing a service agreement or reporting payments on a Form 1099 does not, by itself, make someone an independent contractor.

For federal employment-tax purposes, the IRS considers behavioral control, financial control, and the nature of the relationship. All relevant facts must be weighed. A person who controls their schedule, serves multiple customers, carries business risks, and markets an independent business may differ materially from someone working continuously under company supervision at fixed hours within its core operations.

Other federal or state employment laws may use tests that differ from the federal tax analysis. Misclassification can create retrospective liabilities involving wages, taxes, benefits, and contributions. Determine the substance of the relationship before deciding how to pay for the work.

How does hiring connect with E-2 and L-1A?

For an Israeli entrepreneur developing a U.S. enterprise through E-2, the staffing plan may help explain its economic feasibility. There is no universal rule requiring every E-2 applicant to employ a particular number of people on the first day.

The analysis includes non-marginality: the enterprise’s present or future ability to generate more than a minimal living for the investor and family, or to make a significant economic contribution under the relevant rules. Staffing must be considered with the rest of the evidence, not as a standalone approval formula.

In an L-1A new-office case, staffing also relates to how the U.S. operation will support a qualifying managerial or executive position within one year of petition approval. A chart of planned hires does not replace evidence of real activity.

For either route, recruitment promises should be consistent with cash flow, the scale of operations, actual duties, and the enterprise’s resources. A hiring table can form part of a business plan, but it is not a substitute for a real business.

The management test: can the business deliver its plan?

Imagine a founder establishing a training center in Miami. The plan calls for an administrative employee in year one, another instructor in year two, and an operations manager in year three. On paper, the growth sequence looks straightforward.

Before the first hire, however, the business should examine whether revenue and working capital can fund wages, employer taxes, insurance, and related costs; whether the role is defined; how supervision will work; and whether bookkeeping and payroll systems can support the employment.

If later asked to demonstrate actual development, reliable payroll records, employment documentation, tax payments, and organizational records may be more relevant than an old projection that was never realized. This is not only regulatory compliance. It is business discipline.

Seven checks before the first hire

An operating checklist should connect the proposed role with the applicable rules and the business’s actual resources.

• Identify the state and locality where the employee will perform the work.
• Determine employee or contractor status under the applicable legal tests.
• Set up appropriate payroll, withholding, and reporting, and examine insurance requirements.
• Use the currently valid Form I-9 and meet the relevant completion deadlines.
• Check whether E-Verify participation is mandatory and how the process applies.
• Document duties, pay, hours, expenses, and commitments.
• Ensure that staffing is consistent with finances and operations and, where relevant, the immigration plan.

Frequently asked questions

Must every U.S. company use E-Verify? Not necessarily. It is voluntary for some employers and mandatory for others under applicable state law, federal contracting rules, or other circumstances. Form I-9 is a separate federal obligation for employees within its scope.

Can a business hire before it becomes profitable? Positive profitability is not a general federal prerequisite to hiring. Wage, reporting, tax, and insurance obligations still apply, and the ability to fund the hire may be important to evaluating business feasibility.

Does hiring one employee guarantee E-2 approval? No. It can be relevant, but eligibility requires consideration of investment, the enterprise, ownership and control, the proposed role, nationality, and other requirements.

How long must Form I-9 be retained? Generally, for three years after the hire date or one year after employment ends, whichever is later. Do not destroy it while the person remains employed.

Can an Israeli firm handle every U.S. employment requirement? Immigration and business planning can identify structural and documentary needs. Local employment law, payroll, tax, and insurance may also require appropriately qualified U.S. professionals.

A business starts with a person

Establishing a business abroad requires more than transferring funds, renting premises, or forming a legal entity. It requires a system capable of operating over time. The first employee makes this transition tangible: the venture begins developing capacity beyond its founder.

At DR MOZES CARMEL, we view business and immigration planning as parts of the same picture. Investment, management, corporate structure, and employment decisions can affect one another. Before committing to a step, examine not only what the business intends to do, but what it can substantiate and sustain.