You couldn’t run your small business without your nanny. Heck, without her looking after the kids, you wouldn’t even be able to go to work. So, it makes sense to put her on the company’s payroll, right?

Wrong. Your nanny is employed by your household, not your business.

U.S. law and the IRS are very clear on this point — and you run a big risk if you choose to bend the rules to make your life “easier.” In fact, if the government should ever find out, you’re likely to face and audit and potentially devastating penalties.

Here’s how to do the right thing:

• Embrace being a household employer and apply for an Employer Identification Number from the IRS.
• Ask your nanny to complete the necessary employment forms. These include an I-9 and a W-4. See IRS Publication 926 (2012): Household Employer’s Tax Guide for complete details.
• Withhold (and remit to the IRS) your share of the employee’s Social Security and Medicare taxes. Together these taxes should amount to 7.65 percent of the employee’s wages, and they are the only withholdings legally required of a household employer.
• Withhold and remit any applicable state and federal income taxes. Although this isn’t legally required, it will help your employee avoid large lump-sum bills at tax time.

Once the initial payroll and withholding process is set in place for your nanny, you’ll find that paying her separately is relatively simple. Besides, when you consider the potential alternative — audits, fines, even jail time — it’s well worth any extra effort.

According to employee turnover cost studies compiled by Sasha Corporation, the cost to replace an entry-level employee who quits is $3,500, with estimates for other positions going as high as $25,000! This should provide small-business owners with ample incentive to keep staffers around — starting with the first day on the job.

How you set up the rookie’s first day is critically important to keeping employee turnover down and retention high. In larger companies, the process is called “onboarding,” but the benefits apply to your small business, too. Here’s what a successful welcome gets you:

• New employees become productive quicker;
• They get a keen grasp of your mission and values earlier; and
• Their co-workers appreciate them being able to hit the ground running.

Get started before day one. Let’s say you’ve decided to hire Jane for that open accounting position. In the days following your decision (and before she starts the job), you can communicate with her via email and/or phone to share details about how your business operates and your vision for its future, as well as to answer any initial questions she may have.

Offer a warm welcome. On Jane’s first day, make sure that everything on her desk (telephone, computer, etc.) works and that she has the proper keys and supplies. If you can, greet her in person, but at the very least encourage her new co-workers to introduce themselves and offer a warm welcome. You might even throw her an informal “welcome aboard” party.

Provide information. Have you put together a simple employee handbook covering basic policies and procedures? This should be on Jane’s desk when she arrives. Other things she’ll want to know: computer passwords, names of the people she’ll work with (and their job titles and functions), where the conference room, restroom, and other key facilities are located. The more information she gets up front, the fewer questions she will feel obliged to ask — another way to boost a new employee’s comfort level.

Assign a mentor. Ask a veteran employee to serve as Jane’s mentor during her early days on the job. This mentor can offer answers to “behind-the-scenes” questions that Jane may not want to ask the boss.

Take the new employee to lunch. This is a big one! A new employee should never have to eat lunch alone on her first day. Encourage one or more co-workers to take her out (and tell them you’ll pay), so the “getting to know each other” part gets accelerated.

Get her feet wet. Feeling useful from day one is another great long-term retention tool. What project can Jane get started on right away? Even a small contribution will make her feel productive early on.

Check in and set expectations. At the end of the first day, invite Jane into your office for a chat. Ask how her day has gone, what impressions she’s come away with, and whether she has any concerns you can address. Take this opportunity to talk a little about some short-term goals you both agree on, so she has a good sense of your expectations.

Following a successful first day, Jane will likely go home eager to share her excitement with friends and family. That incidentally heightens your profile as an employer-of-choice, an attractive recruitment tool for future new hires.

As an entrepreneur, you’re used to handling dozens of responsibilities, from generating leads to taking out the trash. But trying to cover all the bases yourself can be not only exhausting, but also potentially harmful to your business.

“Small-business owners who remain convinced they must do everything alone quickly burn out,” says Karen Southall Watts, an entrepreneurship and management consultant. Enlisting help is important, because it gives you the time and space to keep your operation running smoothly — and even grow the business.

Watts offers these tips for figuring out which tasks to delegate and how to do so effectively.

• Start with the sweet spot. Take a moment to write down the tasks that are a perfect match for your core skills, Watts suggests. Chances are this list will line up with your passion and interests (in other words, what made you start the business in the first place). Perhaps you’re great at closing sales, designing products, or marketing to new customers. These are jobs you want to keep doing yourself.
• Figure out what you can delegate “down.” Write down the tasks you do that don’t require a special skill set (or are so easy that you tend to do them on auto-pilot), such as filing papers, housekeeping, or sending mail and invoices. Consider hiring a secretary, virtual assistant, or other employee to take these over. Or, if you already have staff, consider who’s most appropriate to grab the baton.
• Figure out what you can delegate “up.” Watts recommends that you also identify the tasks you do that require special knowledge, skills, or a license. Rather than struggle to figure out complex issues alone, you may want to hire an accountant to do your bookkeeping or taxes, a lawyer for contracts and legal work, or a copywriter to take over marketing and publicity.
• Add to your current skill set. In some cases, it may be better to pay someone to handle short-term tasks which you can take over, at least in part, later on. For instance, if you’re not tech savvy, you might hire a designer to build a professional website for your business. Then, rather than relying on the designer every time you want to make small changes, learn a few basic skills. This is a case where over-delegation may actually be too costly: Perhaps you can take over updating content and maintaining a blog to keep the site fresh. In other words, delegate the heavy lifting, but keep the easy part for yourself.
• Tell yourself to let go. Perfectionists have a hard time letting go of tasks because they feel no one can do them as well, Watts notes. If you fall into the “if you want something done right, do it yourself” category, focus on the free time you’ll gain by delegating. Provide clear, written instructions to your new helper(s). After a few weeks or months, assess their work. Provide feedback and listen to any input your contractor(s) or employee(s) may have. Chances are, the jobs will get done well without you. Best of all, you’ll be able to concentrate on the tasks you enjoy the most.