How to Start My Own Bookkeeping & Payroll Business

Attention to detail and accuracy are required in bookkeeping and payroll.

The Bureau of Labor Statistics says accounting, bookkeeping and auditing clerks are employed in almost every industry. Furthermore, My Own Business website author, Ken Blake, CPA, says outsourcing payroll duties to a payroll service provider saves employers time and increases privacy. Therefore, a booking and payroll business can be a lucrative endeavor. However, the implementation of this type of business must be carefully thought out and properly executed.

Instructions

1. Know your craft well before offering your services to the public. Bookkeeping and payroll duties vary by client. Still, bookkeeping requires solid knowledge of calculating receipts, expenditures, profit and loss, and accounts payable and receivable. Payroll requires apt understanding of federal and state wage regulations and payroll tax laws.

2. Obtain certification before opening the business, if possible. Certification is not a requirement; but the BLS says certified payroll professionals have an edge over their competitors. You can obtain payroll certification through the American Payroll Association and bookkeeping certification via the American Institute of Professional Bookkeepers.

3. Decide on a business structure. The Internal Revenue Service says the primary business types are sole proprietorship, partnership, corporation and S corporation. Check the IRS website for your business type's tax obligations. You can run a bookkeeping and payroll company from home; but if you're hiring workers an established would be more appropriate.

4. Obtain a federal Tax Identification Number or Employer Identification Number from the IRS, if applicable. You do not need an EIN if you won't be hiring employees -- you can use your Social Security number for federal tax purposes. Check with your state revenue agency for your state tax obligations.

5. Check with your secretary of state to determine if you need a state business license. The secretary of state website typically lists the professions requiring a state license. Most states require accountants obtain a state license. But you may not need one for a bookkeeping and payroll business.

6. Check with your local government for local license requirements. Even if you don't need a state business license, most likely you'll need to obtain a city or county license. Your city hall and county courthouse can provide you with licensing information.

7. Hire an attorney to create the necessary legal documents. This include a standard contract for you and your clients to sign; employment contract if you'll be hiring workers; and power-of-attorney document if you'll be handling your clients' tax affairs. An attorney is especially necessary if you're forming a corporation, limited liability company or partnership as these business structures are often complex.

Tips & Warnings

• Invest in software, such as QuickBooks or Sage Peachtree, that has accounting and payroll features.

• Prepare a competitive price list. Call your competitors and see what they charge for services you intend to provide.

• Use the resources that the Small Business Association provides to small businesses, if necessary.

• If you'll be handling your client's tax affairs, be especially careful with tax filings and payments. The IRS charges your client penalties even if you made the error.

References

• SCORE: Obtaining a Business License or Permit
• Bureau of Labor Statistics: Payroll and Timekeeping Clerks
• Bureau of Labor Statistics: Bookkeeping, Accounting, and Auditing Clerks
• IRS.gov: Outsourcing Payroll Duties
• My Own Business: What are the Benefits to Outsourcing Payroll?

Resources

• Best of the Web: Payroll Software
• IRS.gov: Business Structures
• IRS.gov: Employer ID Numbers (EINs)
• Small Business Association: Counseling and Training
• IRS.gov: State Revenue Agency Website