How to Start a Payroll Administrative Service Business
For small businesses, payroll administration can be relatively simple. But it becomes more complicated as the business grows. Payroll administration can include assigning employees as exempt or nonexempt, calculating and paying wages and taxes, managing direct deposits, paying bonuses and commissions, and solving payroll discrepancies. Payroll administrative service providers allow companies to outsource these tasks so they can focus on their core businesses. Starting and maintaining a payroll administration business is a detailed process.
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Instructions
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Consult with an attorney and have him devise a standard contract for your customers. Ensure the contract includes your services and fees, as well as documents giving you power of attorney for certain payroll transactions, such as tax handling. Have your attorney prepare a separate employee contract if you will be hiring people. Include termination rules and consequences of criminal activities such as theft. Prepare a checklist for your customers, which includes the items you will need to establish their accounts, such as EIN numbers and bank account information.
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Go to the Internal Revenue Service's website to apply for a federal employer identification number (EIN). Check with your state secretary of state's office to find out whether you need a license to run your payroll administration business. If so, you may have to pay a fee if your business is a corporation, a limited liability company or a partnership. Note that if your business is small, you can run it from home.
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Open a bank account just for your payroll administration business. Then purchase reliable payroll software. There are many such programs available; you'll need to research them to find which best meets your needs. For smaller businesses, QuickBooks is one option. If you will be servicing a large corporation with many employees, you can purchase in-house payroll software such as Ultipro.
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Obtain clients by sending custom e-mails, cold calling, and mailing or visiting companies and leaving a professionally created proposal packet.
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Establish an invoicing system that automatically invoices your clients when you are finished with each payroll processing. Set your rates according to what your competitors are charging; call them directly and ask their prices. Generally, your fees will be for check processing, direct deposit, W-2 preparation, tax preparation and filing, 401k and health benefits administration (if applicable), manual check and voided check processing, and courier fees for mailing the paychecks and stubs to your client each pay date.
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