Payroll for your small business

Payroll for your small business

Here at YoungMoneyFinance, we attempt to cover all sorts of different topics a young professional may encounter. Many readers (and contributors!) are small business owners, and so I think it’s helpful to provide articles on things that matter to them. It’s so exciting when you take on your first employees as a new startup – but how do you manage monthly payroll?

Understanding your obligations as a new employer for taxes, pay stubs, benefits, and monthly payroll requirements can be overwhelming. But don’t panic! Learn how to do payroll for small business with this step-by-step guide to get you set up and ready to pay your very first employees.

Who Needs a Payroll System?

Any business with more than one employee needs to set up a payroll system. It doesn’t have to be complicated but you definitely need one.

A simple payroll system helps you and your employees keep track of monthly and annual finances. It also means any financial audit from the IRS is easy: your files will be instantly accessible and all payments will have a clear paper trail to audit.

How to Do Payroll for Small Business in 6 Easy Steps

Setting up your payroll system is surprisingly simple. Follow these steps to make sure you don’t miss essential paperwork when you’re setting up your employee payment system.

1. Sort Your EIN 

Apply for your Employee Identification Number. This is a unique identifier for your business and must be included on employee paperwork.

In some states, you’ll only need a federal EIN, but others require a state-specific EIN too so make sure you know which ones you need.

2. Get Your Employee Paperwork in Order

Make sure every new employee fills out a W4 form before your next payroll schedule. This form is vital as it outlines the dependants and allowances an employee claims for, affecting the amount of tax you need to hold back.

You also need to report new hires to your state so make sure this is done as soon as they’ve signed a contract with you.

3. Install Time Tracking Software

If you pay employees hourly it’s essential to install time-tracking software to account accurately.

Choose a simple system that’s easy to use – basic software enables employees to clock-in and clock-out digitally is all you’ll need to start with.

4. Pay Employer Taxes

One in three small businesses spend over 40 hours a year managing and filing their taxes.

Get on top of it before it becomes a burden by filing and paying on time each month and quarter! 

5. Generate Paystubs

Use a simple program like PayStubCreator to generate individual pay stubs for each employee. This will calculate the required taxes and deductions for the individual, making your accounting much easier to complete. 

A pay stub generator will also give your payslips a professional finish and help you and your employees keep track of finances with easy access to historical records for audits.

6. Pay Using Direct Deposit

Make sure every member of staff is paid on the same day of the week or month during each pay schedule.

When you know the final amount each employee needs to be paid, as shown on your pay stub software, you can arrange direct deposits with your bank. It is much easier and more efficient than generating a check for each employee!

More Money Tips for New Business Owners

Knowing how to do payroll for small business is one way to make sure you’re on top of your finances.

However, do you have a long-term plan for your personal finances as well as your business profits? Running your startup is likely to have drained your personal funds. It’s OK: it happens to most entrepreneurs determined to make their business dream come true.

Make sure you stay ahead of the debt gremlins and boost your business success by regularly checking out our money advice blogs!

Disclosure: Some links are affiliate links that may earn me a commission.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.