America's entrepreneurs set up new small businesses every day. Indeed, small business has been the backbone of the U.S. economy since the nation's founding. It will continue to be so for the foreseeable future. If you are on the verge of starting your own business, you can take pride in the fact that your contributions to the economy will be invaluable.
As a new business owner, you will be responsible for payroll to one extent or another. The more you know about payroll processing and management, the better prepared you will be to handle it the right way. We encourage you to consider working with a payroll solution provider, like BenefitMall, if you are planning to hire employees right away.
In light of your plans to start a new business, here are five things you should know regarding payroll:
1. Employee Status
The status of each of your employees will determine how you pay them. For example, if you plan to start out as a sole proprietor or contractor with no employees working under you, there is no need for you to establish a formal payroll solution. All of your income is received as a sole proprietor and reported as such. You would pay your federal and state taxes quarterly.
If you do plan to hire employees right away, they need to be classified as either salaried workers or contractors. This classification determines how they are paid, what benefits they are entitled to, and so on.
2. Tax Withholding
Hiring employees means withholding income and FICA taxes from their paychecks. You must pay those taxes on behalf of your workers and, at the same time, contribute your portion of FICA taxes as well. You must also follow certain rules pertaining to tax reporting and filing.
3. Contracting Payroll Services
Payroll solution providers such as BenefitMall offer a range of different services for clients. A bare-bones solution would consist of nothing more than writing paychecks, withholding taxes, and reporting. You could also choose more comprehensive solutions that include benefits administration, ACA compliance, retirement plans, and workers’ compensation insurance. It is important that you choose a solution that meets all of your needs at a price that fits within your budget.
4. Options for Paying Employees
How your employees are actually paid is really up to you. You can pay with cash, paper checks, or direct deposits into employee bank accounts. In some cases, you might even be able to issue payroll cards. These are preloaded cards that can be used just like debit cards to spend what is earned at work.
5. Payroll Schedule
Lastly, you have numerous options for payroll schedules. For instance, it used to be that companies paid their employees weekly. While that is still done to some extent, most employers now opt for bi-weekly or semi-monthly payroll. Whatever your choice, your payroll solution provider ought to be able to accommodate you.
Bear in mind that your choice of payroll schedule will not impact tax withholding, reporting, and payment to a large extent. Federal and state tax payment schedules are tied to specific calendar dates regardless of how often you pay your employees. Once your payroll schedule is established, your tax dates will not change.
You may have no need for a complicated payroll solution if you are planning to operate as a sole proprietor. But adding employees will change the status of your business and, subsequently, require that you comply with payroll regulations.
Should you have any questions, do not be afraid to contact BenefitMall. We would be happy to review our payroll solutions with you.
To learn more about the pros and cons of hiring employers over contractors, click here.