Hiring your first employees is a big milestone-but it comes with serious responsibilities. From payroll taxes to contracts and state filings, Delaware AI startups in 2025 need to follow the rules to avoid penalties and build trust with top talent.
Tax Code and Legal Reference
- IRC §3401-3402 – Federal income tax withholding rules
- IRC §3121 – Social Security and Medicare (FICA)
- IRC §3301 – Federal unemployment tax (FUTA)
- IRC §132 – Fringe benefits and tax-free reimbursements
- Fair Labor Standards Act (FLSA) – Federal labor law on wages, hours, and classification
Key IRS and State Forms
- Form SS-4 – Get your EIN to run payroll
- Form W-4 – Employee tax withholding form
- Form I-9 – Employment eligibility verification
- Form 941 – Quarterly payroll tax filing
- Delaware New Hire Report – Mandatory for all employees
- Delaware Unemployment Insurance (UI) registration
Example: Compliance for First Hires
Example:
CortexAI, a Delaware C-Corp, hired its first two engineers in 2024. They set up a U.S. payroll provider, collected W-4 and I-9 forms, and registered with Delaware’s Department of Labor. They filed Form 941 quarterly, issued W-2s, and offered tax-free reimbursements under IRC §132. Their clean HR setup helped them onboard a lead engineer from Google with confidence.
Step-by-Step: Hiring Compliance for Startups
- Get an EIN (Form SS-4)
Required to run payroll and report taxes. - Classify Workers Correctly
Know the difference between contractors (1099) and employees (W-2). - Collect Required Forms
Every new hire needs Form W-4 and Form I-9. - Register for State Taxes
Sign up for Delaware UI and file new hire reports. - Use Payroll Software
Tools like Gusto, Rippling, or QuickBooks handle filings, taxes, and direct deposit. - File Payroll Forms (Form 941)
Federal payroll tax returns are due quarterly. - Offer Legal Benefits
Provide compliant health, equity, and reimbursement plans (IRC §132, 125, 83).
Conclusion
Hiring builds your AI startup-but it also builds your liability. Getting compliance right from day one avoids costly mistakes and makes your company more attractive to talent and investors alike.
Call to Action
Hiring soon? Don’t risk IRS or labor issues.
Book a call with Anshul Goyal, CPA, EA, FCA to set up a compliant hiring and payroll system tailored for AI startups.
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Disclaimer
This article is for general information only and not legal or tax advice. Please consult a licensed advisor before making hiring decisions.
Anshul Goyal is a U.S. CPA, IRS Enrolled Agent, and Chartered Accountant (India) with experience helping AI startups set up legal hiring, equity, and payroll compliance.
FAQs – Hiring in a Startup
1. Do I need payroll for one employee?
Yes. If they’re a W-2 employee, payroll registration is required.
2. Is it okay to pay contractors without payroll?
Yes, but only if they meet IRS contractor rules.
3. How do I report new hires in Delaware?
You must file a New Hire Report with the Delaware Department of Labor.
4. Are reimbursements taxable?
Not always. Use IRC §132 for tax-free reimbursements with proper documentation.
5. Do founders need to be on payroll?
Not always-but if they provide services and take regular pay, yes.
About Our CPA
Anshul Goyal, CPA, EA, FCA helps startups build compliant hiring systems, manage payroll taxes, and stay IRS-ready. He serves U.S. and international founders launching AI companies in Delaware and beyond.