Guide to Hiring for Your Business in California

When hiring for your business, the first step is to determine what type of workers you will use. Legally speaking, there are 2 types of workers: employees and independent contractors (aka freelancers). You will then need to know what paperwork to file, what rights your workers will have, and what intellectual property protections you will need.

Should I hire employees or independent contractors (freelancers)?

Businesses often struggle in deciding whether to hire people as employees or independent contractors (also called freelancers or consultants). Using independent contractors instead of employees can save money on taxes and mean less paperwork, but it also means that employers don’t have as much control over the independent contractors. Many employers try to have it both ways, and classify workers as independent contractors but also treat them as employees, setting their schedule and telling them how to do their job. This is known as “misclassifying” and can involve significant penalties.

See more about the pros/cons of each status and how to determine when someone should be classified as an independent contractor or employee.

What are the general employment laws I should know?

See our Employee rights page.

Do I need to file anything when hiring a freelancer?

If certain conditions apply, you need to file with the CA Economic Development Department and provide information about each independent contractor you hire.

Do I need to send any tax forms for freelancers I hire?

Yes, you must send a 1099 to each freelancer who you paid $600 or more. Send the freelancer the 1099 by Jan 31, and send a copy to the IRS by Feb 28.

Do I need to file anything after I hire my first employee?

Yes, you need to file with the CA Economic Development Department within 15 days of paying wages.

You would also send a W-2 the following year by Jan 31 to both the employee and the IRS.

What intellectual property rights should I be aware of when hiring?

If you are hiring a freelancer to create any intellectual property (writing, art, design, etc.) for you, the freelancer actually owns that intellectual property unless you have a signed contract stating that you will own it (“work for hire” or “assignment” agreement). If not, you would simply have a “license” to use the work. See Copyright for more details.¹CA Labor Code Secs. 2870, 3351.5(c))

If you are hiring an employee to create intellectual property, you generally will own the work as long as it is clear that they were hired specifically to do that work.