But if you run your own company, that special day can quickly turn into a pounding headache. As a small business owner, payday isn’t as simple as doling out Monopoly money, passing Go, and collecting $200 (if only.)
When you’re a mighty team of one, it’s hard to even know if you need to run payroll in the first place. And if you’re a mighty team of two, three, or more employees, it’s difficult to figure out exactly what to look for in a payroll provider that does an awesome job.
Still wrapping your head around all this payroll stuff? Then this article is exactly what you need. We’ll break down the ins and outs of payroll: if you really need it plus four things your payroll provider must do for you.
Now, sit back and fan yourself with some of your hard-earned cash and the knowledge that you’ve got this in the bag.
Let’s start with payroll 101—the class that every entrepreneur wishes they could skip. (Sorry, but this stuff is important to ace!) Payroll typically refers to the process of paying employees, along with withholding and paying the taxes associated with those payments.
On the employee side of things, payroll includes withholding income, Social Security, and Medicare taxes from a person’s wages and then sending them off to the government. Running payroll also includes taking care of the employer’s share of Social Security, Medicare, unemployment, and any local taxes.
To summarize, payroll ensures your employees are paid on a regular basis, and the government is rightfully paid their fair share of taxes throughout the process.
Good question. To help you figure out just that, let’s work our way through some qualifying questions.
If the answer is “yes,” then yes, you need to pay employees through payroll. A W-2 employee is simply a full- or part-time worker that you give a W-2 form to at the end of the year. Why is this important? Well, the IRS wants to ensure that both employees and employers are paying taxes, and payroll is a surefire way to ensure that’s happening. But what if you don’t have employees and the business is just you? That brings us to the next question:
If you don’t have employees, how you pay yourself entirely depends on your business type. If you’re a corporation and you provide services for your company, then the IRS requires you to pay yourself through a salary. If you’re a sole proprietorship or a single-member LLC who hasn’t filed as a corporation, then most likely you can’t pay yourself through a salary, and therefore you don’t need payroll.
If you’re looking for the crib notes: The simplest rule of thumb to follow is that if you have employees or you file as a corporation, then yes, you’ll need payroll.
Now we’ve gotten the compliance stuff out the way. Phew! If you just found out that you need payroll, then keep on reading.
Most business owners want to spend as much time on payroll as they do on taxes. Or in other words, no time at all. The thing is, payroll is the main part of your business’ financial plumbing.
That’s why you want a payroll provider that handles it all automatically and keeps you compliant, so you don’t have to deal with messy paperwork and fines at the end of the day. To achieve that state of business bliss, here are four things to look for in a payroll provider that will truly help you and your company succeed.
The perfect payroll provider will…
There you have it. If you do need payroll, sitting in front of you is a rubric for selecting the best provider for your company. Now you can get back to what matters most: running your business like a boss.
Why not give Gusto a try, they’re an easy to use payroll provider designed for small businesses. Sign up for a free 1-month trial. Join the 40,000 other small businesses that use Gusto for payroll, benefits, and HR services that are refreshingly easy.