So, you have decided to start a business – congratulations! You have spent time thinking about what product or service you will provide, developed a business plan, and know who your target audience is. And while creating a brand, name, and scoping out your competition is exciting, what comes next? How do you get up and running with actual employees? And how do you get those employees paid?!
Step 1: Lay the Foundation
First things first, you need to determine your business structure (Sole Proprietorship, LLC, Corporation, etc.). To learn about the most common types of business structures, check out the U.S Small Business Administration website.
Then, you need to apply for Employer ID numbers on both the federal and state levels. Federal Employment Taxes are collected by the IRS – think federal unemployment (FUTA), Social Security, Medicare, and Federal Income Tax. Visit the IRS website to apply for a federal ID number. As for state taxes, here in California, the EDD collects state Employment Taxes – think state unemployment and disability taxes, and California Income Tax. You can navigate to the EDD website to apply for a California state tax ID number. Each state is different, so if you have employees who work or reside outside of California, you will need to apply for state employer identification numbers as necessary.
Next up, it is time to get a business bank account (if you have not already done so!). Think about which bank will be the best for your company. There are numerous factors that go into this decision, but over the years, we have found so many perks of teaming up with a local bank! Why? Well, they usually have a greater understanding of the business climate in your area, will be more responsive since decisions are usually made locally, and will be able to assist you with more individual attention than a big box bank; plus, you will usually spend less time on hold than with a 1-800 number.
And before you hire your first employee, you need to make sure you set up workers’ compensation insurance (aka workers’ comp). Workers’ comp is a form of insurance set in place to provide wage replacement and cover medical expenses in case an employee gets injured on the job. Contact your insurance broker to learn more about your options.
Step 2: Plan Ahead
You are getting close to hiring your first employees, but before you do, consider:
- What is your pay frequency?
- Weekly, bi-weekly, or semi-monthly are the most popular pay frequencies amongst our client base. You can choose which frequency is best for your business, however we have found that:
- For most companies with hourly employees, bi-weekly (aka every other week) paychecks are popular because employees will typically work the same number of hours each week and will know how much to expect on a paycheck. Please note there are a few months throughout the year where there will be 3 paydays within a month.
- For salaried employees, semi-monthly (aka twice per month) paychecks are popular because employee’s paychecks will be more uniform each month throughout the year.
- Weekly, bi-weekly, or semi-monthly are the most popular pay frequencies amongst our client base. You can choose which frequency is best for your business, however we have found that:
- What are your pay periods and paydays?
- The pay period is the range of dates that is covered in a paycheck. The pay period must end at least 3 days prior to your payday for processing.
- Bi-weekly example with payday every other Friday: Monday Feb. 1, 2021 – Sunday Feb. 14, 2021 (payday Friday Feb. 19, 2021)
- Semi-monthly example with payday the 5th and 20th of Month: Saturday Jan. 16, 2021 – Sunday Jan. 31, 2021 (payday Feb. 5, 2021)
- The pay period is the range of dates that is covered in a paycheck. The pay period must end at least 3 days prior to your payday for processing.
- How will you collect your employee’s time worked?
- Punching timesheets, collecting bulk hours, or manual entries are all great options. To learn more about the Time & Attendance solution we offer, please contact us at BusinessSolutions@ibspayroll.com
- Are you offering any benefits? Health insurance? Retirement?
- Contact your local insurance broker or Employee Benefits Specialist. We have some excellent ones to provide to you.
Step 3: Paperwork & Support
Now that you have everything planned out, it is time to get the ball rolling with us! To start the setup with our payroll services, you will first work with a Business Development Specialist to determine the pricing and sign some agreements (such as our Non-Disclosure Agreement). We will also request basic information about your company such as the address, phone number, who should be the main contact, and request the ID numbers you received from the IRS and EDD as well as a copy of a voided check. Don’t worry, we have a simple form with all of this information! From there, we will need signatures on a few Tax & Banking forms and Power of Attorney forms so we have the rights to file taxes on your behalf.
Once we have received all the signed forms, your file will be passed along to a Payroll Implementation Specialist. The Payroll Implementation Specialist will customize your company on our platform to fit your specific needs and they will also train you on how to utilize the system. The Implementation Specialist will also send over documentation that we need for each employee so we can ensure they receive their paychecks and income taxes are paid (such as a W-4 withholding forms and direct deposit information). Our Implementation Specialist will run through your first few payrolls with you to make sure you feel comfortable and confident on the platform.
If you ever run into a roadblock or need support, we are here to help! With a 20 second average ring time, we are just a phone call away from assisting you. You can reach us at 707-586-4300 or email our support system at IBSSupport@ibspayroll.com for less urgent matters.
To learn more about the services we offer, check out our website or email us at BusinessSolutions@ibspayroll.com.
Not new in business but hoping to learn more about how you can work with Innovative for your Human Capital Management needs? Check out our last blog about Teaming Up with Innovative to get the inside scoop!
Disclaimer: These materials are provided for informational purposes only and are not intended as legal or tax advice. Readers of the IBS Blog should contact their legal or tax professionals to discuss how these matters relate to their individual circumstances.