As a new owner of a small business, there are certain things you need to do to guarantee the stability and success of your business. This includes knowing how to set up payroll, a task many first-time business owners find overwhelming. Especially if you plan on doing this by yourself.
But don’t worry. Setting up payroll for your new business doesn’t have to be stressful. By following the tips below, you can get payroll up and running for your business in no time.
Gather the Important Information First
Before you can run payroll, you need to collect certain information, including Form W-4 from employees and filling out Form 1-9.
You’ll also need to register your business for the following things:
- Employer Identification Number (EIN)
- Workers’ compensation coverage
- State tax accounts
- Electronic Federal Tax Payment System
While not all of these tasks impact your ability to run payroll, you’ll have to complete them at some point. So, it’s best to do them as you’re setting up the rest of these things.
Determine Wages and Exemption
Another important task to complete before the payroll setup is determining employee wages.
Part of this includes determining if your employees will be exempt or nonexempt from overtime wages. You’ll also have to make other payment decisions, such as whether you’ll pay an employee a salary vs hourly wages.
For an employee to be exempt, they must either earn a salary or make over a certain amount of money. They are excluded from rights and protections granted to non-exempt employees, such as minimum wage and overtime regulations.
Set Up A Pay Schedule
Next, you’ll need to determine how you’ll pay your employees—whether weekly or monthly.
Most employers tend to pay out employees a few days after the pay period ends so they can calculate their hours and withholdings. Picking a payday is important because it determines what you’ll ultimately need to report on Form 941.
After you choose how often you’ll pay your employees, you’ll need to choose the actual method of payment. You can employees with checks, direct deposit, or payroll cards. Just know certain methods like direct deposit will require you to provide additional information.
The majority of employees today are paid through direct deposit. It’s important to know, however, that there can be potential legal issues with electronic pay stubs. Read more about the legal troubles of electronic pay stubs from ThePayStubs.
Set Up Your Payroll
Once you’ve collected all of this information, you can set up payroll!
There are a few different ways you can run payroll. You can pay an employee or account to do it for you, or use professional payroll software to do it.
Whichever option you choose, make sure you have all the necessary information in advance to run it effectively.
Ready to Set Up Payroll?
Handling payroll as a new small business owner can be intimidating. But it doesn’t have to be!
Now that you know how to set up payroll, you can start paying employees and set your business up for success.
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