Why would you pay someone to do something you can do yourself? This question feels like an obvious one, but when it comes to business issues the line can grow a little murky. After all, if you don’t have the knowledge needed to implement something, it will end up costing you more money and time then if you had contracted out.
Nowhere is this philosophy more present then with handling your company’s payroll. But we’re here to even the odds. This is our business ownerships guide on how to do your payroll!
So without further ado, let’s take a look.
The Prep Work for Business Ownerships
Before you pay out a single dollar, you’ll first want to register your company with the IRS to get an EIN (Employer Identification Number). This number will identify your business within the IRS, allowing you to submit information and distribute payroll in accordance with tax law. You can do this through either a free online application, mail, or fax.
Next, you’ll want to brush up on both federal and state tax laws. You should also check to see whether your employees are true employees or qualify instead as independent contractors. If you (the employer) control when and how the employee works, provide the materials, and work with them in a long-term capacity, they likely count as a normal employee.
These factors affect how you will calculate your payroll, and failing to adhere to these rules will result in your business landing in legal hot water.
Choosing when your pay period takes place is also a smart idea. You have to do less work if you stagger your pay periods (like paying every month), but you could have a difficult time attracting new employees (as they won’t be enthusiastic about the gap between paychecks).
Getting Things Moving
Once that’s sorted out, you’ll need to ensure all your employees fill out both W-4 and I-9 tax forms and get them back to you as soon as possible. If you use contractors, you’ll need to get 1099 forms instead.
You’ll also want to choose some form of payroll software to calculate out the exact amounts and store all the employee information. Implementing a system to log employee hours is also vital for in-house payroll calculation to work. If you choose the manual pen-and-paper route, you’ll need to work out each employee’s gross pay (what they earn before taxes), then subtract all tax or Social Security costs.
Bringing an employee a paystub (or record of their payment) is also a vital piece of the puzzle. If you don’t want to design them yourself, you can choose from these payroll stub templates to get your paystubs out with haste.
And there you have it! Now that have this business ownerships guide on how to do your payroll, you’re ready to get out there and implement this practice into your business today! And if you want to learn more about the latest in business developments, make sure to check out the other articles on our blog!