Payroll Series Part 1 of 4

It’s not easy launching a new business or expanding an existing one. But with careful planning and execution, the business plan will fall into place. A key component of any small business with employees is the payroll function. Although payroll is not complicated in itself, it requires a significant amount of attention to detail. Your employees need to be paid correctly and the various levels of government, of course, want their share. And they want the correct amounts each and every time. So, we’re about to embark on a 4-part series of blog posts to take the small business owner through the payroll process.

Getting Started with Small Business Payroll

Before you begin hiring employees, you must determine the type of entity that you want your company to operate under. There are payroll tax issues that must be considered for LLCs operating as sole proprietorships or partnerships. The right organizational structure for your company can help keep your payroll tax obligations to a minimum. A PEO can advise you on the best strategy for your circumstances.

The first step that needs to be taken when hiring new employees is to obtain an Employer Identification Number (EIN) from the IRS. You may have already registered for this number during your business start up, however, if you don’t have one you can obtain this by filing an SS-4 or by applying online on the IRS website.

Once you have taken care of obtaining your EIN then you can begin to hire new employees. As with all things in regards to government there are a few forms that need to be filled out by each new employee. Although the IRS legally requires you to have new hires fill out these forms, they also serve to protect your business from potential tax liabilities in the event of falsified information. So, without further ado, here they are:

• W-4 Form – All U.S. employees are required to fill out this form in order to inform you, the employer, how much federal income tax to withhold. Just a quick note here for you to refrain from giving advice to an employee on filling out the W-4 form to protect your business from any future tax liability in the event of an error.

• I-9 Form – This form verifies that the employee is authorized to work in the United States. In addition to completing the I-9 form, each new hire must provide documentation in regards to their identity and U.S. employment eligibility. A passport, green card, driver’s license, and Social Security cards are some of the eligible documents required.

• State and Local Taxes – You will also have to check with state and local governments in order to withhold and remit taxes based on the legalities of your locality.

Human Resource Policies

To prepare for new employees joining your organization you’ll need to have some procedures in place in order to integrate them into the company culture. Here are a few Human Resource issues to consider in order to get you started:

• Job Applications
• Employee Handbook
• Background Screening
• Drug Testing
• Employee Assessments

These initial steps will set you up to hire new employees for your small business. If it appears a little daunting then a consultation with a Professional Employer Organization (PEO) can ease the pain and help prevent any slip-ups along the way. In the ensuing posts we’re going to cover the withholding taxes in more detail due to the fact that interest and penalties due to error can financially bury a new enterprise. We’ll then move into making the critical payroll setup decisions, tools to process payroll, and various report filing legalities. So, stay tuned.

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