I run a fully remote company of a dozen people and in the past six months I've had to let two underperforming employees people go. It's a delicate situation that is emotionally fraught for all parties. Here are the standards I've followed for the actual interaction and I think you should follow them too:

1) Do it yourself

You're a small business owner. Doing the emotionally hard stuff is your job. It is your responsibility to say the words. "We're letting you go."

You can have a manager there on the call to follow up with specific separation details, to support the employee, and to be a witness to the exchange, but integrity demands you do it yourself.

2) Get straight to the point

After the opening pleasantries, just come out and say it: "This relationship is not working out." Don't pretend this is about anything else. Don't hem and haw or give a long winded introduction to the issues. Be forthright.

3) Keep Focus

An employee may try to negotiate, to argue against the termination. Remember, "No." is a complete sentence. The relationship is over. Be understanding, but be firm. They may ask for reasons. If they do, you can give two or three broad categories, but if they start refuting each one, then they don't actually want to know, they're simply in the bargaining stage of grief. End that line of discussion.

4) Be truthful

Lying, whether in a misguided attempt to make the employee feel better or to minimize potential harms to the company, is a terrible idea. They're getting fired, any attempt to whitewash that will be, correctly, perceived as shallow. "It's not you, it's me" should be tabooed from discourse. If you're worried about future litigation, then absolutely it's better to say nothing than to lie.

5) Be kind

Being truthful doesn't mean you need to be cruel. You have all the power here and you lose nothing by being kind.

Be empathetic, listen to what they have to say and know as hard as it might be for you, it's much worse for them.

6) Be generous

Kindness is how you approach someone. Generosity is what you actually provide outside the interaction. I can be kind to a panhandler and offer them no money, or I can give them $100 but be a jerk. Be kind and generous here.

One way to be generous is to give them options.

For example, if you are offering three weeks severance, you can suggest they work for a week to transition then two weeks severance pay or they can simply be done at the end of the call with three weeks. It's up to them.

Also, tell them you're happy to present this to the rest of the company as a resignation on their part rather than initiated by the company, if they'd prefer.

Tell them they don't need to make any decisions in the moment, but can think about them for a day or two.

Giving them low stakes options that gives them some agency back is a form of generosity.

7) Keep it short

They've likely just had a huge depressing surprise. Their emotions are activated and they will want to simply have time alone, or at least away from work. Give them that. Thank them for their time and end the meeting.

There are ethical reasons to do all of the above, but also ones of company culture. Your other employees will see how you treat even an underperformer with respect and will appreciate it. It's not easy, but that is part of the job of a business owner, to do the hard stuff.