Whether you are starting a new venture or looking to get a clean slate with the way your existing small business payroll is executed, there are some primary steps that will be crucial to any small business payroll process being done correctly and efficiently. No matter your industry, here is how you set up payroll for small business.
How to Set Up Small Business Payroll
Does your business have an EIN number?
An EIN, or Employer Identification Number, is a critical component of small business payroll. The EIN is also known as a Federal Tax Identification Number and it is the way in which the government identifies different businesses. Before you begin conducting any significant business, and certainly before you start executing small business payroll, you will need to apply to get your business’. This permanent ID number will be used for tax records, opening bank accounts and more. Applying is relatively simple and free. It can even be done online. For more information on getting an EIN, visit the IRS website.
Do you need state or local IDs for your business?
Depending on where you live in the country, you may be required to also apply for state or local ID numbers in addition to the federal EIN. If you are unsure of the laws in your area, consult with a payroll or human resources professional to make sure that you know whether or not this step applies to you and your business.
Are you paying independent contractors or employees?
In addition to the legal implications for the differences between independent contractors and employees, whichever you classify your workers as will also have huge implications for the way you set up and execute your small business payroll. From W-4 and 1099 forms to necessary benefits and PTO, make sure that you have a firm understanding of which type of workers you have and what you will be accounting for and providing them each pay period.
Complete Employee Paperwork
Once you have determined the proper designation for your workers as either independent contractors or as employees, you will go ahead and have them complete the appropriate paperwork. Making sure that this is done thoroughly and correctly on the front end can save you and your company a world of heartache in the long run.
Select a Pay Period
How often will you pay your employees or independent contractors? It may seem like a trivial matter at face value, but there are numerous factors that can determine if you should be doing small business payroll on a weekly, biweekly or monthly basis. If you have existing cash flow or projections for what your cash flow will be is a great place to start. Additionally, are your workers going to be paid on an hourly or salaried basis? If they are hourly, are there going to be periods where you anticipate a lot of overtime? This might also influence how long you decide to make each pay period. If you are overwhelmed and not sure of the right answer, this is another great question to ask during a free consultation with a small business payroll specialist.
Choose a Payroll System For Your Small Business
Will you be executing your small business payroll yourself or outsourcing it to another company? Whichever route you choose to go, make sure that the small business payroll system you are using will be compliant with all federal, state and local laws. Furthermore, if you know that a given small business payroll system can be compliant with applicable laws, remember that it also needs to be implemented in a way that is compliant with those laws. For example, managers concerned with small business payroll in Arizona are understandably concerned with Proposition 206 and how it will impact their day to day. In some cases, popular payroll softwares are leaving those Arizona business owners without the functionality they need to comply with the new law.
Report Payroll Taxes
Once you have taken care of the above steps and started running your small business payroll, it can be tempting to think that all of the work is done. But in fact, this is just when the fun starts. Now that you small business payroll is operational, it is time to make sure that you are complying with all reporting requirements, including reporting payroll taxes. This is another area that is heavily impacted by whether or not you have employees or independent contractors. In order to keep your workers happy and your business free from legal vulnerabilities, small business payroll needs constant attention and care to ensure accuracy.
Contact an Expert
If you are feeling less than confident about doing small business payroll on your own, or if you have questions about what specific steps you should take for your business and situation, feel free to reach out. Your initial consultation is absolutely free and the entire reason we are in business it to help small businesses succeed.