How to Set Up Payroll for Your Small Business

You’ve decided to hire your first employee, or you’re moving yourself onto payroll as an S-corp owner. Before your first pay date, you need to have four things in place on the employer side: your Employer Identification Number (EIN), your state tax accounts, a business bank account, and your payroll account setup.

Each one unlocks the next. The order matters as much as the items on the list.

Setting up payroll correctly protects what you’ve built. SurePayroll By Paychex walks you through each of these four setup steps, then automates the calculations and filings on your schedule.

Get Your EIN First

Your EIN is the foundation. It identifies your business to the IRS the way a Social Security number identifies an individual taxpayer.

Every payroll tax filing tied to an employee paycheck, every state tax registration, and every payroll software account requires this nine-digit number, also called your federal tax ID.

The IRS issues EINs through an online application process that takes about 15 minutes when you have all your business information in front of you. You’ll need this number to open your state tax accounts, your business bank account, and your set up your payroll software or account.

Register for Your State Tax Accounts

State laws typically require two separate employer registrations: a state income tax withholding ID and a state unemployment insurance (SUTA) account.

Through your withholding ID, you remit the state income tax you withhold from employee paychecks. Depending on your city or county, you may also need to withhold local taxes.

Through your SUTA account, you make quarterly unemployment tax payments that fund your state’s unemployment insurance system. The state assigns your tax rate, which factors into your true labor cost per pay period.

The new employer SUTA tax rate varies by state, with most states placing first-time employers in a baseline range that adjusts after a year or two of payroll history.

Register both accounts through your state’s tax or labor agency. Some states issue IDs immediately, while others take one to two weeks. Confirm both numbers before you connect your business bank account. Your state may also require workers’ compensation insurance for employers your size, so check with the same agency while you’re there.

Connect a Dedicated Business Bank Account

You run payroll from a dedicated business bank account, not a personal one. With a dedicated payroll account, you hand accurate records to your accountant at year end and can see your true labor cost against your cash flow.

Open your business account at a bank that supports ACH transfers. Most business checking accounts do, but confirm before you commit.

Some banks require a small verification deposit to confirm a new account connection, which adds one to two business days before your account can process direct deposit. Build that lead time into your first payday.

Choose Your Pay Schedule

Your pay schedule, weekly, biweekly, semimonthly, or monthly, sets the rhythm for two things: how often you pay employees, and how often you deposit the federal income tax, Social Security tax, and Medicare taxes you withhold from employee paychecks.

For most very small businesses with hourly or salaried staff, a biweekly pay schedule is the right fit: 26 pay periods per year, predictable for employees, manageable for cash flow.

Semimonthly works well for salaried-only payrolls, with 24 pay periods that align cleanly to calendar months for benefits deductions.

The IRS assigns your tax deposit frequency (monthly or semi-weekly) based on your payroll volume during a 12-month lookback period. Changing pay schedules later resets your tax deposit timing, payroll software setup, and employee expectations all at once. Make this decision once, and make it deliberately.

Set Up Your Payroll Account

With your EIN, state tax IDs, business bank account, and pay schedule in hand, you have everything you need to build a running payroll process.

You can run that process manually with spreadsheets, or by automating calculations and reports through online payroll software. For most small businesses at your size, a payroll service is the right call.

The National Small Business Association’s (NSBA) Small Business Taxation Survey found that 51% of small business owners who do payroll in-house spend at least three hours per month on payroll tax administration alone. That’s before adding in the rest of the payroll process.

During payroll system setup, you enter your EIN, your state withholding ID and SUTA account number, your business bank account, your pay schedule and first pay date, and the pay rate or salary for each person on payroll, including yourself if you’re paying yourself through your S-corp.

‍SurePayroll is built for small employers with one to 10 employees opening their first payroll account. And, a SurePayroll specialist walks through setup with you at no extra cost.

‍Great experience, easy to use. Onboarding was easy! Software is easy to use. Follow-up and support is on point!

—Craig, Trustpilot review

Once your account is set, run a test payroll before your first live pay date and confirm the calculations, the bank connection, and the net pay each employee expects on payday.

Your First Payroll Run Starts Here

You’ve built the foundation. Next is the employee side of processing payroll: collect Form W-4 from new hires, verify Form I-9, capture direct deposit authorization, and confirm employee information for your first run.

SurePayroll automates tax calculations, files payroll tax returns, processes direct deposit, and remits tax deposits to federal and state tax agencies on your schedule. Once you’re set up, your first run takes minutes.

‍Everything was easy and went smoothly from account set up to running our first payroll.

—Jeff, Trustpilot review

Your first payroll run starts here.