Starting your own business can be an exciting experience that brings a sense of personal achievement. However, if you’re a new small business owner, you should know that running a profitable venture also takes a sense of organization and efficiency, especially when it comes to money and finances.
So, if you are wondering which will probably be the best payroll for small business to apply in your scenario, then you’ve come to the right place. To make things easier for you, keep reading to find out how you can create effective payroll procedures for your own small business and set your operation for success in the years to come.
Register for an Employer Identification Number (EIN)
Your EIN is a one-of-a-kind number assigned to your company for IRS purposes. This number is used to identify your company when reporting employee information to federal and state government agencies. Total income and taxes paid on their behalf are examples of this information. The EIN may also be referred to as a Form SS-4 or a Tax ID — these are the same thing.
Apply for your EIN directly with the IRS. An online application is the most convenient way to complete this transaction. However, applications can also be submitted by fax or mail.
Review Your State and Local Regulations for Additional EIN Requirements
While many states and municipalities accept your federal EIN as identification, some require separate numbers for tax purposes. New York, Massachusetts, and South Carolina are a few examples. By visiting the appropriate state’s small business website, you can determine your city and/or state regulations.
Understand the Difference Between Being an Independent Contractor and Being an Employee
The distinction between independent contractors and employees significantly impacts how income, social security, Medicare, and unemployment taxes are settled, so it is critical to comprehend the difference.
The fundamental test consists of three questions:
- Is the employer in charge of when, where, and how the work is done? If this is the case, the worker is most likely an employee.
- Is the employer in charge of the financial aspects of the job? Are expenses, for example, reimbursed? Is the employer willing to provide work-related tools such as computers? If this is the case, the worker is most likely an employee.
- Is the relationship ongoing, or is the employee hired for a specific project with no expectation of future employment? Does the employer provide benefits to the employee, such as health insurance and paid time off? The worker is most likely an employee if the relationship is ongoing, or benefits are provided.
You are now ready to hire employees once your documents are in order. To ensure that they receive their first paycheck on time, gather tax and payroll information within the first few days of employment. You may want to encourage employees to use direct deposit to receive payments more quickly.
Each employee must fill out a Federal Income Tax Withholding Form W-4, which allows you to calculate the appropriate tax withholding. Employees must also fill out an I-9 form to prove that they are legally permitted to work in the United States.
Select Your Pay Period
The fewer the pay periods, the easier it is to complete your payroll. However, some states require employees to be paid regularly, such as weekly or biweekly. If you want to run payroll less frequently than once a week, check with your state labor department to see if your proposed pay period is under state regulations.
Choose a Payroll Platform
If you intend to handle payroll in-house, ensure that you or your bookkeepers are familiar with the intricacies of the process. To make things easier for them, you should know that there are several high-quality payroll platforms available. On the other hand, most small businesses prefer outsourced controller services because these specialists have the proficiency and experience to assemble payroll accurately and on time.
After you or your controller has entered the personal information for your employees into your payroll system, you are ready to run your first payroll run. Enter or report the number of hours worked by each hourly (non-exempt) employee using the timekeeping tools you have in place. Salaried (exempt) employees are not required to report their hours. Each week, they are paid the same amount.
Make Sure You Calculate and Pay Your Payroll Taxes
Finally, as an employer, you are responsible for paying payroll taxes and generating certain reports. Reports are typically due quarterly or annually. Use the resources provided by the IRS and your state tax office to ensure that all taxes and reports are handled correctly.
Payroll accuracy is critical to the success of your business. You must not only ensure that your employees are paid correctly and on time, but you must also ensure that you are not breaking any laws. Investing in good payroll software can help you streamline the entire process while also saving you a lot of money.