Starting a new company is a very intricate process and there are many details that have to be handled in order to give a venture the best chance at success. One of the most important factors in maintaining accurate financial records and government rules is establishing an accurate and efficient payroll system.
There are some basic things that all leaders on new companies should keep in mind as they get their new business ventures up and running. Payroll can be a complicated and time-consuming factor, but a little understanding is going to relieve a lot of stress. This is what you must know before you start your new company.
Laws of Federal, State and Local Governments
It may seem simplistic, but it needs to be understood that before you can set up a payroll, there needs to be a basic understanding of the expectations the law has for a business. There are different expectations in different areas. A great example is minimum wage. Often the state will have a minimum wage but local areas can have a different requirement.
Businesses are responsible for knowing what laws apply in their municipality. There are also laws that govern overtime that can vary and of course child labor laws as well. Most states offer a website with all the information on adhering to these things. It is the responsibility of the business owner to be in compliance in all these areas before you start a new company.
Another choice a business owner is going to have to make is what constitutes a pay period. This involves choosing the day of the week that your payroll will be issued on and for the length of time that pay period will be. The length of time can be weekly, bi-weekly or even semi-monthly. It will depend on what works for you and your type of business.
Then the day that payroll is issued will be important for all to know, as Friday or Monday are generally the most common days for processing payroll, but it makes sense to some businesses to choose another day of the week. This is important for your employees so that they understand when they will have money and can plan accordingly, and it is important for the business owner so that all of the accounting can be done and checks can be ready to be issued on that day.
A new business is going to need to invest in some sort of software to assist in creating checks and keeping track of payroll. Helpful check stub generator software will help create all of a business’s pay stubs quickly and make a professional-looking record of all payroll transactions, for the company and for the employee.
A new business is going to have to understand when and what taxes are going to need to be paid. State and federal taxes are generally paid each month on payroll but other types of taxes like sales tax collected can be paid to the government on a quarterly basis. Understanding when a tax is due will allow for a new business to avoid being fined or getting into more serious legal trouble. Government agencies are generally pretty efficient at notifying a business if payments need to be higher or more frequent.
Of course, when dealing with the government, a business must file the proper forms in order to stay in compliance. Federally there is a quarterly tax form, Form 941, that needs to be filed each quarter and Form 940 that needs to be filed each year for the Federal Unemployment Tax Act. Employers are also required to send records of W-2 and W-3 forms to the Social Security Administration. This task can be handled electronically, most often through your suite of payroll software, but the employer needs to be aware that this is their responsibility before they start a business.
Another basic of payroll is time keeping, but business owners must clearly state what the expectations are for employees and how their time will be monitored. If one has nonexempt employees, then a business needs to keep track of hours they work. Hourly employees should be monitored through some electronic means so that all hours can be tabulated accordingly.
Business leaders must be aware of added costs for overtime and holiday pay, and communicate the policies to employees so that they all understand the rules. Other employees may be paid on a salary basis. The employer starting a business also needs to understand the laws governing wages in their municipality and state. If there are questions, a business owner can contact the IRS to make sure that they are in compliance with all payroll laws before the business gets underway.
Starting a business is an exciting time and will provide many benefits and of course the opportunity to make money. Understanding the basics of payroll and what is expected is a huge part of starting a business. Not knowing what is expected as far as payroll goes will lead to unhappy employees and might even lead to legal trouble. A business owner should use all the resources that are available to them.