Hello,
Thanks for the question. There is no requirement to convert to an LLC to have employees. Many sole proprietorships have employees. You would be required to have an Employer Identification Number if you don't have one already and begin reporting wages to your state and the IRS. Apply for an EIN online here.
If your sister wants to be a co-owner you could consider creating a partnership. Check out:
Tax Information for Partnerships.
As with all good business decisions, it is wise to consider the cost and administrative requirements for small businesses, partnerships, and employment compliance. A small business with a small sales volume may not be able to justify additional expenses associated with compliance-related filings and costs.
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