First-Time Business Owner? Tips For Successfully Getting Your Payroll System Up And Running
If you're starting a business, you are going to need to establish a payroll system. This is true whether you plan to have a single employee or 50 people working under you. Here are a few tips that will help you get your payroll system off the ground while staying compliant with all pertinent laws:
Get an Employer Identification Number (EIN).
The first step to ensuring that you and your business are ready for payroll is to apply for an employer identification number (EIN). Also known as an Employer Tax ID, the EIN is necessary for a business to report its taxes and to submit other necessary documents to the IRS or state government. You can apply for an EIN directly on the IRS website.
Make Sure to Classify Your Workers Properly (Employees vs. Contractors).
Believe it or not, there is a big difference between an employee and an independent contractor. However, the difference is not always crystal clear to employers, especially those new to the business world. In order to avoid any unnecessary penalties from the IRS, you need to make sure that you classify each worker properly. This is because the withholdings are completely different. If you have control over what a worker does and how they do it, then they are likely an employee. However, if they have free reign with their work, they are likely an independent contractor. The IRS has a lot of helpful tools to help in the proper classification of workers.
Choose a Pay Period Per State Requirements.
Before you can start hiring and paying employees, you must determine a pay period. However, this can't always be whatever you want, as some states have rules dictating the frequency of payroll. For example, in North Carolina, there are no regulations as to how often an employer pays employees. However, in Connecticut, employees must be paid every two weeks unless otherwise approved by the labor commissioner. In Utah, pay periods must be semi-monthly except for salaried employees who can be paid monthly. It is imperative that you follow the state guidelines to make sure that you are always compliant.
Consider a Professional Payroll Service.
Things with payroll can get tricky because of all of the legal requirements and responsibilities that you have as a business owner. Therefore, you may want to consider speaking to a professional payroll service in your area, such as Blueback Accounting, to handle payroll for you so that you can focus on the success of your business.