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How to Start a Nonprofit Organization in 7 Steps

Office of a nonprofit organization

Once you learn how to start a nonprofit organization, you’ll realize it’s similar to starting any type of business. It takes dedication, patience, and a trustworthy team. Our systematic approach to starting a nonprofit will maximize your chance of success. We understand that starting a nonprofit is a philanthropic act, and we applaud your initiative.

How to Start a Nonprofit in 7 Steps 

A nonprofit organization is a type of business that operates without the intention of making profits for its owners or investors. Instead, nonprofit organizations focus on advancing a social cause or serving the community. 

Due to their virtuous missions, most nonprofit organizations are exempt from federal income taxes and some state taxes. 501c3 nonprofits are the most common type of nonprofits and there are 1.4 million active 501c3 charities in the United States. Furthermore, donors can claim tax deductions for donations to 501c3 organizations.

Step 1: Define the Purpose of Your Nonprofit Organization

As we just mentioned, there are over one million active nonprofit organizations in the United States alone. This means there are likely other nonprofit organizations doing similar work to what you plan on doing with your nonprofit. You can use the National Council of Nonprofits locator tool to find similar organizations.

If your nonprofit organization can’t differentiate itself, it may be hard to secure funding and donations. The first step in starting a nonprofit is to define the purpose of your nonprofit organization and choose the cause you want to support. Then, find proof that your nonprofit fills an unmet need within your community.

Attracting financial support is much easier when you have strong numbers to back up your purpose and idea. To help define the purpose of your nonprofit, follow these steps:

  1. Think about the intended audience you want to serve
  2. Brainstorm your intended solution and the potential value you’ll provide
  3. Research nonprofit organizations that already serve the same demographic and need
  4. Consider alternative solutions such as joining an existing nonprofit, donating to an established nonprofit, or becoming a consultant
  5. Make sure that starting a registered nonprofit is the best way to serve your mission
  6. Double-check that you will be adding value and creating a unique solution to a specific problem

Once you define your nonprofit’s purpose and are completely sure you want to proceed, you can move on to step two.

Step 2: Build Your Nonprofit’s Foundational Values

The next step is to build a sturdy foundation for your nonprofit with defined values and guidelines. A clear mission statement and plan will ensure your organization is well-run and cohesive.

These steps involve:

  • Choosing a name for your nonprofit organization
  • Identify and state the need or problem
  • Formulate and state a solution to that need or problem
  • Define a target audience and population
  • Determine your nonprofit’s vision, mission, and values

Naming Your Nonprofit Organization

At the start, you’ll need to choose a name for your nonprofit. This name should relate to your nonprofit’s main activities and goals. Your nonprofit’s name will act as its primary form of branding and will influence the tone of your organization for many years to come. 

We recommend brainstorming a list of names with your team, friends, or acquaintances. Then, narrow down your list to those that inspire you or are memorable. As you’re thinking of names, remember what your nonprofit stands for and the problem you’re trying to solve. Furthermore, ensure that your nonprofit’s name is easy to remember and say. 

It’s also a good idea to check that the name isn’t already taken and to see if the web domain is available for domain name registration. Your state may require that your nonprofit has a corporate designator, such as Corporation, Incorporated, or Company (Corp., Inc., and Co., respectively). Check with your state’s incorporation page to see the requirements.

Create a Defining Mission Statement

After finalizing your nonprofit’s name, you’ll need to create an everlasting mission statement. Your mission statement will clarify your nonprofit’s purpose and is used to motivate your staff and volunteers.

A well-written and clear mission statement sends a powerful message about what your organization stands for and what you aim to achieve. Make sure it’s unambiguous, concise, and easy to understand. You should also gather feedback on your initial mission statement and continue modifying it based on everyone’s input. 

Avoid using buzzwords, use simple language, and don’t write it as a marketing tagline. Instead, a defining mission statement should help your nonprofit organization attract the right donors and staff. 

Step 3: Create a Comprehensive Business Plan

Creating a comprehensive business plan is essential to ensure your nonprofit organization is prepared and well-equipped to operate for the years to come.

This business plan acts as a blueprint for how your nonprofit will operate, what staff responsibilities will be, and how your nonprofit will achieve its mission. First, let’s discuss the main pieces of a well-defined business plan.

1. Executive Summary

The executive summary describes your nonprofit organization’s purpose and mission. It also summarizes your market analysis and proves an identifiable need within your community. Then, you will explain how your nonprofit will meet that need and provide a solution.

2. Programs, Products, and Services

This section provides an in-depth description of the products, programs, and/or services your nonprofit will provide. Describe who the beneficiaries are, what your goals are, and how you plan on achieving them.

3. Marketing Plan

Explain the current trends in your nonprofit’s niche and how you will advertise your nonprofit’s services. Describe the plan on getting your message out while being specific and explaining the exact marketing channels you plan to use.

4. Operating Plan

Define your nonprofit’s organizational structure and what happens in the day-to-day operations. Describe the different roles throughout the organization and what each role aims to achieve. 

5. Impact Plan

Explain the exact change you wish to create in the world. What are the specific objectives you aim to accomplish, and how will you measure your progress?

6. Financial Plan

Your nonprofit organization will succeed or fail based on your financial planning and framework. So, define your financial status and write up a budget. Furthermore, discuss the confirmed income you will receive, potential revenue streams, how much money you need to start, and how much money you need to operate. 

7. Bylaws

Your organization’s bylaws describe the operating rules and provide a framework for management procedures. These are your tools of internal accountability and outline the inner workings of your organization. Bylaws are also required in order to obtain tax-exempt status from the IRS.

The bylaws contain the procedures and rules for activities such as electing directors, holding meetings, appointing officers, and other formalities.

Step 4: Choose Your Board of Directors

Responsible and genuine people are essential to running a successful nonprofit. It would be best to find partners who share the same passion for your mission. Building a robust leadership team in your board of directors is the best way to ensure the longevity of your nonprofit organization.

Your board of directors is responsible for strategic decision making, regulatory compliance, making hires, and supporting day-to-day operations. A well-equipped board of directors will consist of individuals with expertise and resources in different areas.

The board of directors should be evenly split between:

  • Individuals who have expertise in marketing, finances, and legal matters
  • Individuals who are connected to your target demographic and have expertise in your service field
  • Individuals who are comfortable asking their networks for donations

In addition to your nonprofit’s directors, you’ll also need staff and potential volunteers.

Staff Members

You also need to decide if you want to hire staff yourself or leave it to your board of directors. Either way, some essential staff roles include the Communications Manager, Fundraising Manager, Membership Manager, and Events Manager.

Unlike directors, staff members are typically salaried, so it’s important to create a defined job description and requirements list for each role. The exact roles you choose to hire also depend on your nonprofit’s organizational plan and structure. 

Volunteers

Most nonprofits rely on volunteers to run their operations. So it’s important to create volunteer guidelines that determine:

  • How many volunteers your nonprofit will need
  • How much time do you expect volunteers to help on a weekly basis
  • If your volunteers need specific skill sets 
  • If you’re going to train volunteers

Step 5: Incorporate Your Nonprofit Organization

Since you’ve already chosen your nonprofit’s name and board of directors members, completing the incorporation paperwork is straightforward. In your incorporation paperwork, you will declare your organization’s name, purpose, location, and initial board of directors.

Furthermore, you must file your Articles of Incorporation with your state’s corporate filing office. We recommend incorporating your nonprofit in the state where your organization will operate. 

The exact filing and fees differ from state to state, and incorporating a nonprofit doesn’t automatically make it 501c3 tax-exempt. You’ll need to include specific language in your Articles of Incorporation that state your intentions of applying for federal tax-exempt status.

Once you finish the paperwork, you can send it to your state filing office. Some states require electronic filing, while others ask for copies sent via mail. 

While you’re waiting for the state to approve your Articles of Incorporation, you should obtain a federal employer identification number (EIN). An EIN is used to track your organization’s financial activity and allows you to open a business bank account and hire paid staff. Furthermore, every major transaction your nonprofit makes requires an EIN. 

Use a Business Registration Service

Starting a nonprofit organization can be tricky and confusing if you haven’t had any experience before. This is why we recommend using legal help services that can help you incorporate your nonprofit organization and file for federal tax-exempt status. 

Our favorite legal services are Incfile, Legalzoom, and Rocket Lawyer because they have dedicated packages for starting nonprofit organizations. These business registration services will ensure your Articles of Incorporation are filed properly and that you have everything needed to file your tax-exempt request forms. 

Step 6: File for Federal Tax-Exempt Status

After your Articles of Incorporation are approved, the next step is to file for 501c3 tax-exempt status with the Internal Revenue Service (IRS). This involves filing IRS Form 1023.

We recommend filing your Form 1023 within 27 months of the date you file your nonprofit Articles of Incorporation. Form 1023 is up to 28 pages long and can take 3 to 12 months for the IRS to return its decision. 

The form is essentially an audit of your proposed activity and a comprehensive examination of your nonprofit organization’s purpose, planned programs, and governing structure. The IRS will check if your organization is being formed for 501c3 purposes. It’s also looking for potential conflicts of interest.

But before you file your Form 1023, you must have:

  • Filed your Articles of Incorporation
  • Prepared your bylaws
  • Held your first nonprofit organization meeting

The IRS will ask for a thorough description of your nonprofit, most of which you already covered in your business plan. As such, it may be relatively easy to fill out Form 1023.

However, there is also a Form 1023-EZ that is the condensed version of Form 1023. The Form 1023-EZ can be used by organizations with gross receipts of less than $50,000 and less than $250,000 in assets. Check the IRS website to see if you’re eligible. 

Once you receive 501c3 status from the IRS, there is no expiration date. This means your nonprofit will hold its 501c3 status as long as it exists. However, the IRS can revoke the status if it finds you don’t legally comply with its requirements.

Step 7: Secure Startup Funding

Once your organization is officially incorporated, and the IRS approves your 501c3 status, you can start securing funding for your nonprofit organization. Securing funding is the most challenging part of learning how to start a nonprofit but also the most important.

A nonprofit organization with weak funding is unlikely to sustain itself long enough to further its social cause.

Grants

The best way to secure early funding for your nonprofit is by applying for grants. Grants are usually given to nonprofit organizations with a distinct purpose or program. 

It’s essential to find grant programs that align with your mission statement. Furthermore, we recommend researching a variety of different grants and applying to only the ones you meet the requirements.

Writing a grant proposal is time-consuming, so you must choose the grant programs which you can see your nonprofit organization building a relationship with.

Fundraising

Nonprofit organization fundraising consists of soliciting donations from corporate sponsors, and individual donors, and organizing fundraising events. In terms of receiving donations, online giving is growing in popularity because of how convenient it is. 

Donors to your 501c3 nonprofit organization can receive tax deductions on their donations, so it’s important to let them know this detail.

Best Nonprofit Formation Services

Starting a nonprofit organization on your own is time-consuming and complex. We recommend using a nonprofit formation service to ensure the entire process is smooth and error-free. 

Here are our three favorite nonprofit formation service providers.

IncFile logo

IncFile

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IncFile is a company formation service that has a wealth of experience forming nonprofit organizations. Apart from being one of the best LLC services, IncFile offers three different nonprofit creation packages depending on how much help you want. Its services are affordable and effective, and we highly recommend creating your nonprofit with IncFile.

  • Affordable packages
  • EIN tax number and IRS Form 2553 assistance
  • Unlimited phone and email support
  • Expedited filing on top package only
  • Business banking account on top package only
LegalZoom logo

LegalZoom

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LegalZoom is a widely used online business formation and legal help services company. Similar to IncFile, LegalZoom has three different pricing packages and offers complete assistance in creating a nonprofit organization. LegalZoom has helped create over 100,000 nonprofits. Read the complete LegalZoom review to find more about it.

  • Reputable nonprofit organization packages
  • 60-day refund policy
  • Ensures your nonprofit application is complete
  • More expensive than other options
  • Longer filing times
Rocket Lawyer logo

Rocket Lawyer

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Rocket Lawyer is another legal services provider that can help you create a nonprofit organization with ease. Its team will help you create your bylaws, file for 501c3 status, and help you get in contact with a nonprofit attorney.

  • Direct contact with lawyers
  • Full refund if not satisfied with services
  • Amazing customer service
  • Addons for non-members can get expensive

Frequently Asked Questions (FAQs) for How to Start a Nonprofit

Let’s go over a few common questions individuals ask about how to start a nonprofit organization.

Bottom Line on How to Start a Nonprofit

The secret to how to start a nonprofit organization is to support a cause you’re truly passionate about. Your passion will lead to innovative solutions and a mission statement that many individuals can relate to.

It’s also essential to treat your nonprofit as a real business and to constantly review your business plan and financial statements. To help start your nonprofit, we recommend using a legal service such as IncFile. These services make it easy to file for 501c3 nonprofit status.  

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How to Use a Gantt Chart in 9 Steps

Gantt Chart Template

Gantt charts are a popular and time-tested way of visualizing project workflows. But they’re not just for any project. This project visualization approach aligns with the waterfall methodology that focuses on completing a task or process before the next one can begin. 

A Gantt chart lets you organize a project’s timescale and create an overview of team members, resources, and essential ideas in one place. While it’s a powerful method used by veteran project managers, you can easily overcomplicate things if you’re new to it. 

How Does a Gantt Chart Work?

Gantt charts as we know them today were created by engineer Henry L. Gantt in the 19th century. It’s a horizontal bar chart with project tasks on the vertical axis and a timeline on the horizontal axis. The chart depicts summary elements, milestones, and task dependencies all in one place.

Gantt Chart Template

If it’s the first time you’ve come across Gantt charts, they can look like a stack of bars and arrows. Before moving forward, you need to understand the structure of a Gantt chart and what each bar, its length, and arrow represents. 

A Gantt chart is made up of three elements: tasks, task durations, and task dependencies. 

  • Tasks: Each horizontal bar on a Gantt chart represents an individual task in the project. These are the basic building blocks of a project.
  • Task duration: The length of each bar represents the duration of each project. The starting point of each bar, in relation to the x-axis at the bottom of the chart, represents when each task will start.
  • Task dependencies: The arrows leading from one bar to the next represent a task dependency. It means the task at the tail of the arrow must be completed first for the task at the head to start.

Key Concepts of a Gantt Chart

The explanation of the three features above is enough for you to have a clear understanding of what a Gantt chart represents. But to have a better understanding of how Gantt charts work, you need to understand a few underlying concepts: the critical path, milestones, dependencies, and resource management. 

The Critical Path

The critical path provides an overarching order to your project, establishing a baseline for you to follow. Arguably, the critical path is the most important part of a Gantt chart’s layout. It represents the journey of the project from start to finish. 

Every essential aspect of the project is represented in the critical path, which is usually highlighted, for example in red, to symbolize its importance in the project. Any delays in the critical path tasks will lead to inevitable delays in the project.

Milestones

Typically represented as a symbol or shape interposed at certain intervals in the project, a milestone depicts the key goals in the project. Unlike tasks, they are set points in time that give you an idea of what things you need to have completed at what time. Not only do milestones emphasize both minor and major goals within the project, but they also help to create depth in the timescale, breaking it down into manageable pieces. 

Dependencies

Dependencies show progression in the chart. These tasks tend to be represented with arrows between one another, highlighting the necessary progression of tasks to reach a goal. This is particularly effective both for providing an overview of a project and so that team members can understand how their particular task fits into place. 

The benefits of dependencies include improving collaboration and productivity because when everyone understands their job and their responsibility within the group, they can work towards achieving the collective goal.

Resource Management

One of the greatest benefits of using a Gantt chart is the ability to accurately map out the resources you need, whether that be people or products. You can easily assign tasks to team members according to their strengths. This way, you maximize your team’s efficiency. 

Similarly, material resources can be simply distributed using the timescale. This makes ordering and coordinating resources a process that can be managed according to the details on the chart. No more dithering with forms and running out of essential supplies, keeping track of what is needed becomes simple on a Gantt. 

Now that you have a better understanding of what Gantt charts are and their underlying principles, let’s move on to the interesting part. 

Obviously, you need to learn how to create one before you can learn how to use a Gantt chart. This is why we’ve divided this guide into two parts: creating a Gantt chart and using one. That said, the entire Gantt project management process is pretty simple. The goal is to not overcomplicate things. Follow this principle and you should have a pretty well-planned project schedule on your hands.  

How to Create a Gantt Chart in 4 Steps

Creating and using a Gantt chart can be slightly different with different project management tools. We’ll use a generic approach to make this guide easy to understand and follow no matter which project management tools you use. 

Step 1: Define Project Outcome and Time Range

Gantt charts are based on the waterfall model which emphasizes clearly defining your project outcome and time frames up-front. You should have a clear understanding of what you or your client wants at the end of the project. This way, it’s easier for you to define the critical path and all the associated individual tasks you need to complete to get there. 

You also need to define the time range so your Gantt chart project has a clear start and end date. This timeline will form the foundation on which you build your project Gantt chart.

Step 2: Identify all Essential Project Tasks

The next step is to break down your entire project into smaller, more manageable bits. This is a two-fold process where you first divide your project into subprojects and then identify individual tasks in each of those projects. But this is for larger, more complex projects. If you’ve got a smaller project, you can jump to identifying individual tasks and arrange them chronologically. 

Step 3: Identify Relationships between Tasks

This is where you use arrows between tasks and set dependencies. You need to identify the relationships between tasks and decide which task is dependent on which and in what way. Setting dependencies is as easy as drawing an arrow between two bars.

Simply put, there are two types of relationships between tasks: successor and predecessor. But you have four types of dependencies you can set between tasks. 

  1. Finish to Start – Can’t start the successor task until the predecessor finishes.
  2. Start to Start – Can’t start the successor task until the predecessor starts.
  3. Start to Finish – Can’t finish the successor activity until the predecessor starts.
  4. Finish to Finish – Can’t finish the successor activity until the predecessor finishes.

Step 4: Add Dates, Resources, and Milestones

Once you’ve identified tasks and identified the relationships between them, your Gantt chart is almost ready to go. All you need to do is add some dates, assign tasks to team members, and set important milestones and you’ll have a ready-to-go Gantt chart. 

Finalize when a task starts and when it should be completed. This will help you identify tentative deadlines for your sub-projects and add milestones to the critical path. If your project is already underway, you can start assigning tasks to team members. This completes the creation of the Gantt chart.

If you’re using suitable project management software, creating a Gantt chart would be easy. But if you’re going with conventional spreadsheets, you will have to create and format a chart manually. Once your chart is created, remember to update it as things change. It’s important to review your chart at least once a week to reflect on progress and other changes to your project.

How to Use a Gantt Chart to Plan a Project

Once you’ve created the chart, it’s now time to use it to manage your project. But before we begin, let’s check out a stat that emphasizes the importance of using Gantt charts for project planning.

Approximately 39% of projects fail due to a lack of planning. This is where Gantt management comes in. Project managers can map out the complete project, determine deadlines, and manage your team and resources effectively using Gantt charts. Here are the rest of the steps you need to follow to use a Gantt chart to plan a project. 

Step 5: Conduct Workflow Analysis

Gantt charts let you conduct your project’s workflow analysis with ease. This means you can view not only the timescale of work to be performed but chart who is doing that work and what resources you need to put towards certain tasks. 

Workflow analysis is a great tool for managers who wish to see, both at a glance and in greater depth how a project is progressing and how resources are being allocated. This makes coordinating teams easier and provides information on progression for each individual as well as on the team. 

Using project management software often allows you to utilize additional features which can build upon your workflow analysis within a Gantt chart. Due to the graphic nature of the chart, using it for statistical modeling and further graphing is a beneficial way of understanding project and team workflow.

Step 6: Identify Critical Path

By identifying the critical path in a project, it also becomes simpler to identify priorities and areas of focus for teams and individuals. Because all team members can view this information, everyone has the same level of awareness of the tasks at hand, their deadlines, and the milestones the team is aiming for. 

Allowing total transparency in accessing the Gantt chart has many benefits, but access to the critical path is a paramount example. Collaboration and work towards milestones are both improved by improving awareness of the tasks at hand. When a whole team is aiming toward the same goals, there is a greater sense of cohesiveness. 

Step 7: Make Your Project More Manageable

Another benefit of the graphical representation of projects through a Gantt chart is that it breaks projects down into more manageable chunks. Through both critical paths and dependencies, it is clear which bar represents which task and the chain of work that is required to progress a project. 

As a result of this, each project becomes a set of smaller tasks that can be delegated and sourced out to team members, so everyone has a manageable role within the process, and nobody needs to feel overwhelmed by taking on the project as a whole. The simplistic formatting of the Gantt also allows for fewer meetings and briefings, saving time. 

Step 8: Meet Deadlines

The Gantt chart also presents a methodical and automated depiction of a project, so deadlines become more accurate and reliable. Due to dependencies and the following of a critical path, everything runs smoothly according to a plan. Should work get delayed, it is easily amended on the chart.

Deadlines are both easier to follow and easier to correct on a modern Gantt chart. Because the progress of each task is visible, and optionally the progress of individual team members too, keeping on schedule is the priority of everyone as an individual and as a collective. Seeing which tasks to prioritize also enables resources to be better allocated in line with goals.

Step 9: Monitor Project Progress

The final step in managing your project with a Gantt chart involves keeping a close eye on both the Gantt chart as well as those carrying out the project, adjusting the plans as the work progresses. 

Maybe a piece of equipment will break down that will set back the start date. Or perhaps the team will take on another project that takes precedence. There could be changes in funding. Or maybe the client will change their mind? 

Change is inevitable, but luckily, modern-day Gantt charts don’t require that you start from scratch. By using some elements of the agile methodology, you can make the adjustments as necessary and keep your team up to date. 

To monitor project progress, all you need to do is to check the completion level of each bar or team member. This is especially helpful for project managers, especially in industries like marketing, where different strands of a project come together, such as creative tasks and writing tasks. 

Top 3 Gantt Chart Software for Project Management

The era of paper and pencil Gantt charts is long gone. So is the time of creating Gantt charts on spreadsheets. Today’s fast-paced work environment demands creativity and swiftness in project management methodologies which is made possible by project management software. 

Creating and using Gantt charts becomes much easier when you use Gantt project management software, also known as Gantt chart software. Here are our top picks for the best project management software for Gantt management. 

TeamGantt logo

TeamGantt

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Launched in 2010, TeamGantt, a PM tool with time tracking feature, is a Gantt chart creator that makes it simple for you to schedule, manage, and track project tasks and resources. It helps you organize all your documents, conversations, and tasks in one central hub.

It has a powerful drag-and-drop feature that lets you start planning your projects in minutes. TeamGantt is one of the simplest project management software as it is fairly easy to use with customizable Gantt chart templates. It also offers a free plan for small, three-member teams.

  • Built-in Gantt view
  • Risk assessment templates
  • Built-in time tracking ability
  • Limited features
  • No integrations.
  • Lacking customer support

Pricing

  • Free: Free for 3 users
  • Standard plan: $24.95 per month for 1 user + unlimited guests
  • Advanced plan: $29.95 per month for 1 user + unlimited guests
GanttPRO logo

GanttPRO

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GanttPRO offers affordable pricing plans and an intuitive interface along with advanced features, making it a great choice for SMBs. With GanttPRO, you’ll be able to plan your project timelines and oversee individual tasks, resources, and your team efficiently. 

Features like importing and exporting options, history and baseline mode, and custom and pre-configured templates make it an attractive choice for Gantt management. GanttPRO also offers integrations with common software like Jira Cloud, Slack, and Google Drive.

  • Intuitive and easy-to-use interface
  • Affordable and simple pricing structure
  • History and baseline mode let you save and return to previous project versions
  • Limited reporting options
  • Basic integrations only
  • Limited customer support

Pricing

  • Individual: $15 per user month (billed annually)
  • Team: $8.90 per user month (billed annually)
Monday.com logo

monday.com

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monday.com offers a range of simple but powerful features for small, remote teams. With its easy-to-use interface, this tool makes it simple to design project workflows and handle day-to-day project tasks.

monday.com offers Gantt chart views in all of its plans and customizable workflow templates for different kinds of projects. It offers integrations with a range of other apps so you can streamline your management with ease. Read the full monday.com review for greater insight into it.

  • Modern user interface (UI) is easy to use and navigate
  • Highly customizable features 
  • Ideal for managing ongoing work for multiple projects
  • Confusing pricing of plans
  • Slow customer support 
  • Best features only available with upper tiers of paid plans

Pricing

  • Basic: $10/user per month
  • Standard: $12/user per month
  • Pro: $20/user per month
  • Enterprise: Inquire for price

Frequently Asked Questions (FAQs) for How to Use a Gantt Chart

Here are some frequently asked questions about how to use a Gantt chart to plan a project.

Bottom Line – How to Use a Gantt Chart

Gantt charts are a powerful project management tool that lets you map out your project efficiently and have a clear overview of project progression. Creating and using Gantt charts to plan a project is pretty simple and doesn’t involve a lot of technical skills. 

Remember that you want to keep things as simple as possible. It’s easy to overcomplicate things with Gantt charts and this is where it starts going downhill. A quality project management software, also known as Gantt chart software, like TeamGantt, GanttPRO, or monday.com can help you use Gantt charts with ease.

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How to Do Payroll Yourself in 15 Steps

How to do payroll yourself concept

Payroll is an essential part of any business, whether you have one employee or 10,000. Do-it-yourself payroll can lead to costly mistakes and delays without the right know-how. This article explains how to do payroll successfully in 15 straightforward steps.

You should check out these payroll tools to make your life easier!

 

How to Do Payroll Yourself In 15 Steps

Running payroll is not simple, with many pieces to consider. Having an understanding of each piece is paramount to an issue-free result. Below we take a detailed look at each step that makes up the process.

Step 1: Acquire an Employer Identification Number (EIN)

Before thinking about payroll, you need to legitimize your business with the federal government. While sole proprietorships can get by using the owner’s social security number for tax purposes, any venture paying employees requires an employer identification number. This nine-digit number is unique and differentiates your company from all others.

To acquire an EIN, simply pay a visit to the IRS site to check eligibility and submit an application. The process is free, and you’ll receive your number shortly after completing the process.

Step 2: Register Your Business in Your State

Every state is different when it comes to requirements for registering a business. Some states require a state-level EIN, while others mandate registration with specific agencies. Be sure to check in with your state to see what’s required.

Step 3: Understand Local, State, and Federal Laws

Federal, state, and sometimes local governments have labor laws that you as a business owner have to comply with. When laws differ across government levels, you’ll have to use the one that best benefits your employees.

Payroll Laws can vary significantly from state to state or city to city. Here are some important payroll items you should look out for:

  • Minimum wage
  • Timeframe for delivering paychecks
  • How to calculate overtime
  • If there is local income tax
  • Worker’s compensation requirements
  • Information required on pay stubs

Step 4: Figure Out Who You’re Going to Pay – and How

This may seem like a no-brainer, but your team may not have defined roles in a new enterprise. You’ll need to assign hourly rates or a salary for individuals working for you, and pay may not be the same if someone wears several hats. Make sure there aren’t any assumptions or miscommunications that could spell disaster when payday rolls around.

You also need to decide who is an employee and who you’re keeping on as an independent contractor. Independent contractors pay their own taxes, and you only need to pay them a flat rate for their services each week. You’re not required to include independent contractors on your payroll, but you do need to keep all employees on the books.

It’s illegal to misclassify employees as independent contractors, so be very careful when assigning these titles to anyone you work with. Mistakes here can lead to issues involving fines or worse. There are differences between the two roles to help you make proper designations.

Step 5: Have Employees Fill Out Forms

After you’ve identified who your employees are, each one will need to fill out a W-4 form to document their filing status. This document tells you as an employer the tax rate you need to use for each employee. Your workers also need to complete an I-9 form to confirm eligibility to work in the United States. Be aware that some states may have forms of their own as well.

Step 6: Decide on a Pay Schedule

With your team in place, you need to decide how often you pay them. Whether it’s once a week or twice a month, it’s important to be transparent with this information up front and stick to it. Failing to do so can result in upset employees or a high turnover rate that can affect the success of your business.

Step 7: Track Employee Hours

Salaried employees aside, you’ll need to keep tabs on how much time each hourly team member spends working each day. Most companies do so through time cards employees use to identify when they’re on or off the clock. Knowing to the minute how long your employees work each pay period is essential for calculating accurate wages. Read our article on how to convert minutes for payroll for a more accurate calculation.

Step 8: Calculate Gross Wages

At the end of a pay cycle, you’ll calculate gross wages from an employee’s hourly rate and the number of hours they worked, up to 40 hours. You’ll have to factor in overtime for any work beyond that, which usually amounts to 1.5 times the base rate. Salaried employees are easier to calculate, as each should have a set amount earned for each pay interval.

Step 9: Deduct Amounts for Tax Purposes, Retirement Accounts, Insurance

Calculating gross wages is necessary, but this is not the amount you’ll pay your team. It’s crucial to know which payroll deductions to remove from each employee’s paycheck and subtract those from gross pay.

Payroll deductions come in many forms, but the most common is for tax purposes on both the state and federal level. Employees filled out W-4 forms to declare the rate you need to tax them, and you’ll need to make this unique calculation for each team member. The IRS created an Excel spreadsheet to make the process a little easier.

Some deductions are pre-taxed, and you’ll need to remove these before calculating payroll taxes. Typical examples of pre-taxed deductions are employee contributions to a health insurance plan or a 401(k).

You’ll need to take out other deductions after calculating payroll taxes. Amounts removed in this way are typically Roth IRA contributions, life insurance policies, and wage garnishments.

This area can get a little tricky, especially when it comes to pre-and post-tax deductions. It may be easier to list each deduction on a separate line when running calculations to reduce errors.

Step 10: Finalize Employee Net Pay

With a complete list of gross wages and deductions in hand, you’ll calculate net pay, the actual amount that will go on an employee’s paycheck. To reach an amount for net pay, you need to subtract all deductions from the gross pay amount. 

Step 11: Determine Amounts for Employer Taxes

After you’ve figured out how much you’re going to pay each employee, you still need to deal with employer taxes. As an employer, you’re required to pay two different taxes on the federal level. The Federal Insurance Contributions Act (FICA) tax covers social security and Medicare, whereas the Federal Unemployment Tax Act (FUTA) goes toward federal unemployment insurance.

You’ll have to calculate these taxes based on each employee’s taxable gross wages. Rates on each of these taxes change from time to time, so check with the IRS to ensure you’re paying the correct amounts.

Similarly, states mandate you pay a state unemployment tax (SUTA) to help fund unemployment programs. Each state has its own tax rate that can vary depending on how much you pay employees and those you’ve laid off.

Step 12: Double Check All Your Work

We all make mistakes, but in the world of payroll any error can be a costly one. You’ll have to make up the difference any time you underpay an employee, which can cause a panic any time budget numbers are tight. On the other side, you can reclaim overpayments made to an employee, but likely not without hurt feelings and damaged relationships.

The same holds true when submitting payroll taxes to the government, although they may be less forgiving. Miscalculations can result in fines that your company can’t afford to pay. 

It’s always best to double-check all your calculations before submitting any payments to help avoid these issues. Even though looking over the numbers again requires time, it can save time in the long run instead of locating and fixing mistakes after the fact.

Step 13: Send Out Payments

Once you’re happy with the numbers, it’s finally time to send out some checks. The most common methods for doing so are direct deposit into a bank account or with paper checks. No matter which route you go, be sure to attach a pay stub that explains how you came to this amount. Don’t forget that some states require certain information to appear on a pay stub.

Step 14: File Tax Forms and W-2s

Checks are out the door, but your work isn’t quite finished. You’ll need to pay those FICA taxes to the government quarterly using Form 941. These taxes are due on the final day of the month following the end of a quarter.

You’re responsible for FUTA taxes once per year using Form 940 on January 31st for the previous year. Lastly, business owners must fill out a W-2 form for each employee by January 31st, containing yearly wages and deductions for the previous year.

Step 15: Document Everything

As you perform your payroll, be sure to document everything you do. Not only is this beneficial for your records, but federal and state governments require having this information on hand. You’ll need to keep the documents for whatever duration state and federal governments require. Moreover, to perform a payroll audit, you need comprehensive and accurate payroll documentation.

Using Payroll Services to Run Payroll

Do-it-yourself payroll can be a very time-consuming process, especially as your company grows. You’re more likely to make mistakes in a manual process that can lead to delays in payment or more headaches down the road. Fortunately, payroll services can help alleviate the strain of running the numbers every pay period. Below are some of the ways using a payroll service can make life easier.

1. Save Employee Information

Payroll services typically use the power of the cloud to securely save important payroll information. Not only can you access this information from anywhere, you won’t have to re-enter the same data each time you sit down to crunch numbers. The platform keeps track of salaried or hourly pay as well as tax rates and the like.

2. Knowledge of Federal, State, and Local Laws

As you register payroll software for use, you’ll need to share your business’s location. In doing so, the software can look into payroll laws relevant to you specifically. Knowledge of these laws can prevent issues with paychecks and ensure you’re providing the information you need to the government and employees.

3. Reduce Errors

It is better to use a computer that won’t make mistakes when calculating payment amounts for each of your employees than by hand. These payroll services can automatically calculate deductions from information you provided when you hired the employee.

Unless you use a service with built-in time tracking, you’ll still have to log employee hours each week. However, the amount of work required of you each week goes significantly down.

4. Does Taxes for You

Since these payroll systems are aware of current tax rates, it can make normally challenging math a breeze. You won’t have to think twice about coming up with amounts for quarterly and annual employer taxes. Some software will even generate forms to send the government and employees as required.

5. Regain Lost Time

Payroll services automate much of the process, giving you back all the time it would take to perform do-it-yourself payroll. The challenge will be figuring out which other area of your business to spend this newfound time in.

6. Payment Reminders

When the time comes to pay your employees or the government, payroll services can leave you a reminder to that effect. These services can automatically send out direct deposits for you or leave paper checks stacked on the printer. Even in the busy shuffle of work life, you shouldn’t miss a payment that could leave you in hot water.

7. Generate Checks and Pay Stubs

Payroll tools also have the ability to create paychecks printable with the click of a button. It’s also possible to generate customizable pay stubs with information required from state or federal governments.

8. Log Employee Hours

You will need to log hours for non-exempt employees to know how much to pay them each cycle. Payroll services may include a means to track hours through a digital time card or by having employees log hours manually. The information gets logged right into your payroll system so you don’t have to transfer it over from elsewhere.

9. Customer Support

In the event of an issue, most payroll services have a customer support line you can reach out to deal with the problem quickly. When you’re under a time crunch, it’s essential to have others on hand that can walk you through a process or clear up a discrepancy.

10. Cost

Some payroll software options charge for their services, but many of these are still cheaper than paying an employee or outside company to do the work for you. Others have free payroll features at least as the base level to get your payroll up and running.

Frequently Asked Questions (FAQs) for How to Do Payroll Yourself

There are many questions surrounding do-it-yourself payroll. This FAQ aims to tackle some of the more common ones.

Bottom Line on How to Do Payroll Yourself

Do-it-yourself payroll is an option for any business but requires a significant amount of time to complete, especially as you bring on new staff. The increased risk of error in the manual process can lead to delays and fees that any company is better off avoiding. Payroll services such as Gusto and Square can remove the strain of payroll by automating calculations and saving time.

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How to Convert Minutes for Payroll in 3 Steps + Free Conversion Chart

Materials for converting minutes for payroll

If you own a small business with multiple hourly workers, it’s essential to convert minutes for payroll when your employees work partial hours. Converting their time worked to exact minutes prevents a lot of payroll problems in the future. It also provides accurate wage distribution to ensure your employees aren’t overpaid or underpaid.  

How to Convert Minutes for Payroll in 3 Steps  

There are two strategies when you want to convert minutes for payroll. You can either use the actual hours worked or round the hours to the nearest quarter. 

We recommend using the actual hours worked because rounding can lead to overpaying or underpaying your employees in the long run. No matter which method you choose, learning how to convert minutes for payroll involves three quick and easy steps.

Step 1: Calculate Total Working Hours and Minutes

Decide if you want to use actual hours worked or rounded hours worked in your payroll conversion calculations.

Actual Hours Worked

To calculate your employee’s actual hours worked, you’ll need the total hours and minutes they worked for the payment period. You can find these exact numbers by gathering timesheets or time and attendance records for each of your employees.

Let’s go over an example timesheet for a weekly hourly wage employee. In this example, the employee doesn’t take lunch breaks, so he doesn’t clock in and out for lunch.

Key Features

Monday

Tuesday

Wednesday

Thursday

Friday

Clock-in & out times

9:00 AM – 5:15 PM

9:10 AM – 5:30 PM

9:00 AM – 5:00 PM

9:15 AM – 5:25 PM

9:05 AM – 4:55 PM

Total Time Worked

8 Hours & 15 Minutes

8 Hours & 20 Minutes

8 Hours

8 Hours & 10 Minutes

7 Hours & 50 Minutes

To calculate total hours worked, add up the total number of hours across the five days. Only add the hours, you will add the total minutes separately.

  • Total hours: 8 + 8 + 8 + 8 + 7 = 39 hours

Next, add up the total minutes the employee worked.

  • Total minutes: 15 + 20 + 10 + 50 = 95 minutes

Convert 60 minutes of the employee’s total 95 minutes to equal one hour.

  • 95 minutes – 60 minutes = 1 hour and 35 minutes

As such, the employee worked a total of 40 hours and 35 minutes for the week.

Rounded Hours Worked

You also have the option to convert minutes for payroll by using rounded hours. If you choose this method, federal law states that you must practice accurate rounding or risk violating FLSA minimum wage and overtime pay requirements.

With rounded hours, you can round the employee’s time to the nearest quarter of an hour. A quarter of an hour is 15 minutes so you can round to :00, :15, :30, or :45.

Employee time from 1 to 7 minutes past the previous quarter can be rounded down. For example, if an employee works 8 hours and 6 minutes, their rounded hours would be 8.

Employee time from 8 to 14 minutes past the previous quarter must be rounded up and counted as a quarter-hour of work time. For example, if an employee works 8 hours and 27 minutes, their rounded hours would be 8.5. 

Rounding guidelines:

Round Down

7 minutes or less past the previous quarter (1-7, 16-22, 31-37, 46-52)

Round Up

8 minutes or more past the previous quarter (8-14, 23-29, 38-44, 53-59)

Step 2: Convert the Minutes to Decimals

The next step is to convert only the minutes worked to a decimal. 

For example, let’s say your employee worked 40 hours and 15 minutes during the week. You would divide only the 15 minutes by 60 minutes to receive your decimal.

  • 15/60 = 0.25

This means that the employee worked 40.25 hours during the pay period.

You can also use our time conversion chart to convert minutes for payroll quickly:

Payroll Minutes to Decimals Conversion Chart

Minutes

Hour Decimal

Minutes

Hour Decimal

Minutes

Hour Decimal

Minutes

Hour Decimal

1

0.02

16

0.27

31

0.52

46

0.77

2

0.03

17

0.28

32

0.53

47

0.78

3

0.05

18

0.30

33

0.55

48

0.80

4

0.07

19

0.32

34

0.57

49

0.82

5

0.08

20

0.33

35

0.58

50

0.83

6

0.10

21

0.35

36

0.60

51

0.85

7

0.12

22

0.37

37

0.62

52

0.87

8

0.13

23

0.38

38

0.63

53

0.88

9

0.15

24

0.40

39

0.65

54

0.90

10

0.17

25

0.42

40

0.67

55

0.92

11

0.18

26

0.43

41

0.68

56

0.93

12

0.20

27

0.45

42

0.70

57

0.95

13

0.22

28

0.47

43

0.72

58

0.97

14

0.23

29

0.48

44

0.73

59

0.98

15

0.25

30

0.50

45

0.75

60

1.00

Step 3: Multiply Calculated Time by the Wage Rate

Once you convert the employee’s time, it’s time to calculate how much you need to pay them. Take the employee’s hourly wage rate and multiply it by their decimal time.

For example, if the employee worked 40.25 hours and earns $20 an hour, you would take 40.25 and multiply it by 20.

  • 40.25 hours x $20.00 =  $805.00

The employee’s total wages before payroll taxes and deductions are $805.00.

How to Track Converted Minutes for Payroll

One of the most common issues with payroll processing is finding a way to convert minutes for payroll when you have many hourly workers. Converting each employee’s total hours worked by hand is time-consuming and prone to human error.

There are two better solutions we recommend for your business.

1. Payroll Software

The best way to track your employee hours and convert them to decimals is through payroll software like Gusto. Gusto will sync your team’s hours automatically, convert the hours to decimals, and pay your employees. 

You can also use Gusto to track your team’s hours. Employees can log their hours using Gusto’s desktop website or mobile app. To avoid misuse, you can designate office sites and specific locations where your employees are allowed to clock in and out. 

In essence, Gusto handles all of your payroll processing tasks accurately and quickly. You’ll be able to manage your team from a single location rather than using multiple software and apps. Read the review on Gusto to know more about this payroll tool.

2. Spreadsheet

Another way to convert minutes for payroll is by using spreadsheets such as Microsoft Excel or Google Sheets. This is the best option for businesses that don’t want to invest in payroll software but also don’t want to calculate wages by hand.

Create a payroll processing spreadsheet and list out the appropriate columns with each of your hourly employees. Then, input their hours worked after each pay period and run a simple formula to convert minutes for payroll.

Frequently Asked Questions (FAQs) for How to Convert Minutes for Payroll

At this point, you should fully understand how to convert your employees’ minutes for payroll. However, let’s discuss a few additional questions that business owners commonly ask us.

Bottom Line on How to Convert Minutes for Payroll

Although it’s straightforward to convert minutes for payroll, it can be extremely time-consuming if you have a large workforce. You’ll need to run separate calculations for each employee and double-check them to ensure they’re accurate. Nonetheless, your goal is to translate each employee’s hours worked into decimal form. Then, you multiply it by the employee’s pay rate.

If you’re interested in optimizing your payroll process, Gusto tracks employee working hours and calculates their decimal number automatically. You’ll receive a detailed cost report of wages and taxes each pay period without having to complete any manual calculations.

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How to Calculate Payroll Taxes in 5 Steps 

Businessman filling out a payroll tax form

As a business owner, learning how to calculate payroll taxes are one of the most daunting tasks to tackle. Among all the other aspects of your business that you manage, it’s also essential you calculate your taxes correctly. Without accurate tax calculations, you can face legal and financial penalties if the IRS investigates your business. 

Payroll taxes are entirely your responsibility as a business owner so let’s dive into how to calculate them.

How to Calculate Payroll Taxes in 5 Steps 

Payroll taxes are taxes employers pay on behalf of their employees. The exact amount of tax is determined by each employee’s salary, wage, and tips. These taxes are used to finance social security programs, including Medicare and Social Security. 

The most significant portions of the social insurance taxes are the federal payroll taxes, which appear as Medicare (MEDFICA) and Federal Insurance Contributions Act (FICA) tax on the employee’s pay stub. 

As a business owner, you may be surprised to learn that employees effectively pay around half of the whole payroll tax with their wages, with a smaller contribution from you. Payroll taxes are directly deducted from each employee’s earnings and sent to the Internal Revenue Service (IRS). 

Before you start calculating payroll taxes, your employees need to complete these documents:

  • Form W-4: Employee’s Withholding Certificate
  • State W-4 (as applicable)
  • Direct Deposit Authorization Form
  • Form I-9: Employment Eligibility Verification
How to calculate payroll taxes in 5 steps

Step 1: Calculate Gross Pay

The first step to calculate payroll taxes is calculating the wages earned by each employee and the amount of taxes that need to be withheld as part of running payroll. You also need to make deductions for items such as retirement benefits, health insurance, and garnishments. Expense reimbursements will have to be added back as well.

Gross pay is calculated differently for hourly salaried employees.

Calculating Gross Pay for Hourly Employees

You calculate gross pay for hourly employees by multiplying the number of hours they worked during the pay period by their hourly rate. For example, if the employee worked 40 hours in the week at $30 an hour, their gross pay is $1,200.

Remember to include overtime pay, which is typically 1.5 times the normal hourly rate if the employee works more than 8 hours a day or 40 hours a week. Here’s a comprehensive process of how to do payroll for contractors and freelancers.

Calculating Gross Pay for Salaried Employees

For salaried employees, simply divide their salary by the number of pay periods in a tax year. For instance, if an employee earns an annual salary of $60,000 and receives a paycheck twice a month, their gross pay for each pay period is $2,500 ($60,000/12 months/2 monthly pay periods)

Make sure to add on commissions, tips, and bonuses the employee earns to calculate the total gross pay.

Step 2: Calculate Employee Tax Withholdings

The next step is to calculate the employee’s tax withholdings. Once you have the employee’s gross pay and the number of allowances from their W-4 form, you can begin to calculate how much you need to withhold to cover their taxes.

For the majority of states, you’ll need to withhold both state and federal taxes as well as FICA taxes from each paycheck.The information on the W-4 states how much income tax needs to be withheld from the employee’s paycheck each pay period. The employee will claim their marital status and the number of allowances they have on the W-4 form. You need this information to calculate their FICA, federal, and state taxes.

Calculate Federal Income Taxes

Assuming the employee completed the W-4 in 2020 or later, you would use the updated tax tables found in Publication 15-T, Federal Income Tax Withholding Methods.

This process involves:

  • Adjusting the employee’s wage amount
  • Determining the tentative withholding amount
  • Accounting for tax credits
  • Tallying the final withholding amount

Calculate FICA

You and the employee both contribute 7.65% to FICA, including 6.2% for Social Security and 1.45% for Medicare. The first $137,700 of an employee’s wages are subject to the Social Security tax. Employees earning more than $200,000 are subject to an additional Medicare tax.

Let’s follow the example from above with a gross pay of $2,500 per pay period:

  • Social Security: $2,500 x 6.2% = $155
  • Medicare: $2,500 x 1.45% = $36.25

The employee’s total FICA withholding is $191.25 (155+36.25).

As the employer, you are responsible for the same amount in FICA taxes.

Calculate State and Local Tax

The next step is to calculate any state taxes the employee is responsible for. Some states, like Texas, have no state income taxes. The other eight states without an income tax are Alaska, Tennessee, Wyoming, New Hampshire, Florida, South Dakota, Nevada, and Washington. So check your state’s income tax guidelines and follow them accordingly.

Let’s follow the example from above and imagine that your business is based in New Mexico.

For New Mexico, the wage withholding table states that you need to deduct $64.67 along with an additional 4.9% of the surplus amount over $2,183.

We calculate this by:

  • $2,500 – $2,183 = $317
  • $317 x 4.9% = $15.53
  • $64.67 + $15.53 = $80.20

You will need to deduct $80.20 from each paycheck to withhold for New Mexico state income tax.

Step 3: Handle Deductions

After you calculate the employee’s tax withholdings, the next step is to take out any applicable deductions. These are voluntary pre- and post-tax deductions such as 401(k) plans, health insurance premiums, or health savings account contributions. 

Certain employees will have involuntary deductions like wage garnishments or child support that need to be considered. You’ll receive an order from the state, the IRS, or a judge which tells you to withhold these items. 

It’s important to be cautious and accurate here because pre-tax deductions like 401(k)s are taken out of gross income in step 1. This means that tax withholding calculations in step 2 will be reduced and pre-tax deductions save the employee more on taxes. Post-tax deductions are calculated after step 2. 

Step 4: Add Expense Reimbursements

If an employee paid for company expenses with their own money, they need to be reimbursed. As an employer, you can either pay reimbursements by combining them with payroll or separately from payroll.

Expense reimbursements are not included in gross wages. This means they are not subject to tax withholding. All expenses you reimburse to employees should be paid in full and added on to net pay at the end of your calculation.

Step 5: Total Everything Up

After you’ve completed all the calculations to determine gross pay, tax withholdings, deductions, and reimbursements, you’ll be ready to calculate the paycheck:

  • Begin with gross pay
  • Subtract employee tax withholdings
  • Subtract deductions
  • Add expense reimbursements
  • Arrive at net pay

Net pay is the amount of money you need to send to the employee come payday. 

Following the example above, let’s walk through the calculation:

Summary of how to calculate payroll tax:

Gross Pay

$2,500

Federal Withholding Tax

Calculated from W-4 and Publication 15-T form

Social Security Tax

-$155

Medicare Tax

-$36.25

New Mexico Income Tax

-$80.20

Net Pay

$2,228.55 – Federal Withholding Tax

The employee’s net pay is $2,228.55 minus their specific federal withholding tax.

Calculating Employer Payroll Taxes

Now that you know how much of the employee’s paycheck to withhold for taxes, it’s time to calculate how much you’re responsible for as the employer.

FICA Matching

You must match the employee’s FICA tax withholding, which means your business will also pay 6.2% for Social Security and 1.45% for Medicare. Using the previous example, you would need to match the employee’s $191.25 FICA obligation.

Unemployment Taxes

As the employer, you also have to pay federal and state unemployment taxes. These taxes are only paid by the employer and not the employee.

Federal Unemployment Tax (FUTA)

FUTA is 6% of the first $7,000 in wages you pay to each employee every year. If your company is subject to state unemployed tax, you’re also subject to a federal tax rate credit of up to 5.4%. This makes the effective tax rate 0.6%. When an employee earns more than $7,000 in a calendar year, you stop paying FUTA taxes for that specific employee in that tax year.

Following the example from above, federal unemployment tax: $2,500 x 0.6% = $15

State Unemployment Tax (SUTA)

SUTA varies from state to state. We recommend you consult with your state’s Unemployment Revenue or Department of Labor for tax rates, filing requirements, and wage bases.  

Paying the IRS

Once all the heavy calculations are complete, your next step is to send the tax payments to the proper taxing authority. For federal income tax and FICA, you send this to the IRS. Payments need to be sent to your state’s withholding tax agency for state and local income taxes.

Make sure you send both the taxes you withheld from the employee’s paycheck and the taxes you owe as the employer.

The comprehensive way to calculate payroll taxes include:

  • Federal withholding
  • Social Security (employee portion)
  • Medicare (employee portion)
  • State income tax (if applicable)
  • Social Security (employer portion)
  • Medicare (employer portion)
  • FUTA
  • SUTA

This adds up to the total payroll taxes you must pay.

How to Calculate Payroll Taxes with Gusto

Although it’s manageable to calculate payroll taxes manually, this isn’t recommended. Taxes require accuracy, and a small mistake in your calculations can lead to disaster in the future.

This is especially true if you have a lot of employees. It’s not only time-consuming to manually calculate payroll taxes for each of them, but you are also putting yourself at an increased risk of making a mistake.

We recommend using Gusto, a payroll software that automatically calculates payroll taxes for you. It also automates payroll, includes an employee self-service portal, and offers some human resources (HR) tools. It regularly tops lists of the best payroll software for small businesses.

Gusto has a free employer tax calculator which provides an accurate estimate of how much you’ll have to pay in payroll taxes over a year.

Screenshot of How to calculate payroll taxes in Gusto
(Source: Gusto.com)

To completely calculate your payroll taxes, you’ll need to register for an account and enter each employee’s Form W-4 details.

Frequently Asked Questions (FAQs) for How to Calculate Payroll Taxes

We understand that payroll taxes are confusing, so here are a few common questions and answers to provide more clarity.

Bottom Line on How to Calculate Payroll Taxes

Calculating payroll taxes is entirely manageable as a business owner. As long as you know which numbers to use and what steps to follow, you’ll end up with an accurate number. The overall goal is to start with the employee’s gross pay and end with their net pay. The difference between the two is the employee’s withholdings you need to pay as payroll taxes on behalf of the employee.

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How Do I Create A Free Professional Email Address?

Businesswoman creating a free professional email address

A business email address can boost your business image and make it easier for people to trust you. If you run a small venture or a startup, a professional email address can also make you look as well-established as your top competitors.

However, it is challenging to find a truly free business email provider. Most web hosting providers that offer free email domains require you to incur costs associated with their plans. In this article, we will explore four straightforward steps to obtain a “nearly” free professional email address coupled with free inbox organization tools.

What Is a Free Professional Email Address?

The most popular free email addresses contain the domain name of the email service provider. These include yahoo.com, hotmail.com, and gmail.com. On the other hand, a business email address comes with your domain name, giving your company a unique identity.

For instance, if your company’s name is “Backstreet,” a professional business email address may be Terry@backstreet.com. Using a generic email like Terry.backstreet@gmail.com can demean your company’s credibility or give it an unprofessional vibe.

4 Easy Steps to Set up a Free Professional Email Address

A business email address is a crucial aspect of your branding. It provides a superior strategy for connecting your company’s face with your website domain and official communication channel with your clients.

Here are four easy steps for setting up a free business email address:

Step 1: Register Your Domain Name

The easiest way to obtain the best free business email address is first to register your domain name. Ensure you choose a name that reflects your business as closely as possible. Note that your domain name of choice will dictate your website address and business email.

A free professional email address is not technically free because you have to incur some undelaying fees. The easiest way to register a domain name is through a web hosting provider. Some of the best hosting providers include:

The web host you choose will also provide free email hosting allowing you to create a free business email address. They will also take care of server maintenance.

To register, choose a hosting plan and confirm whether your domain name of choice is available. If it is taken, try to find a closely related name, perhaps by adding a hyphen, abbreviations, etc. The next step is to enter your personal details, click “I Agree” to the terms, and make a payment to set up a web hosting account for your domain name. Read the step-by-step guide on how to register a domain name.

Step 2: Select an Email Provider

Depending on your web hosting company, you may choose a random email provider or have to choose one from the company’s email service partners. For instance, you have to select GSuite or Webmail to access your emails when using Bluehost.

If you have the freedom of choice, here are some of the options you could go with:

  • G Suite (Google Workspace)
  • Microsoft Office 365
  • Zoho Workplace
  • Rackspace
  • FastMail

Step 3: Create a Free Business Email Address

So, you have registered your website’s domain name and even have an email provider. It’s now time to create a personalized free professional email address.

The steps you will take here will depend on your web hosting company. With Bluehost, for instance, you’ll need to visit the Bluehost dashboard and click the Email and Office tab to create your free professional email address using your domain name. When using Zoho, visit the Mail Pricing page and select the Forever Free plan.

Step 4: Check Out Your Free Business Email Address

Your web hosting company will provide detailed instructions to help you access your free business email address and send or receive emails. Essentially, you need to choose a webmail application like Outlook or Gmail. Just ensure your choice affords you a smooth user experience and satisfactory customization options.

Also, you can create multiple user accounts and manage them by changing passwords and freeing up storage space. To make your company appear well-established, you can set up addresses for your customer service, sales, and HR departments.

If the free plan is too basic for your business needs, you always have the option of upgrading. Paid premium email services offer more advanced features.

Frequently Asked Questions (FAQs) for Free Professional Email Address

Here are answers to frequently asked questions about getting a free professional email address.

Bottom Line on Free Professional Business Email

A free professional email address can help you make an excellent first impression. It is a powerful branding, email marketing, and digital communication tool that can enhance modern office functions.

Use the above steps to set up your free business email address and enjoy robust cloud storage features, and a range of productivity tools to ensure smooth business email communications.

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How to Register a Business in the US in 6 Steps

A businessman registering a business online

Business registration in the US may seem like a challenge, but the process is actually quite simple. Whether you’re doing the work yourself or using a service to move things along, there’s little required to get your company up and running. Below are six steps that will take you through the business formation process.

Use ZenBusiness to register your business with ease.

How to Register a Business in the US In 6 Steps

You can register your business in no time by following these six steps. It’s best to perform each step in order to minimize downtime.

Step 1: Choose a Legal Business Structure

It’s one thing to know whether you want to start a business or what type of business to start, but another entirely to understand which legal business structure suits your needs. This important first step sets the tone for your business, dictating tax filing and what daily operations look like. Below are some of the most common business structures new ventures choose:

Sole Proprietorship

If you’ve started up a business but never taken the time to declare a business structure, you’re a sole proprietorship. These single-person business models do not differentiate between personal and business assets, leaving all your funds at risk in the event of a lawsuit or financial misstep.

Partnership

Partnerships represent businesses where two or more individuals own a business together. In a limited partnership (LP), one partner can face personal risk while other partners have limited liability. Limited liability partnerships (LLPs) protect all partners on the personal level from any business-related issues.

Limited Liability Corporation (LLC)

Business owners can start an LLC to create a clear divide between personal and business assets. Should your enterprise face financial debt, your personal assets remain safe and untouchable. An LLC or Limited Liability Company can still be a single-person business similar in structure to a sole proprietorship.

Even though you’re differentiating your personal and business assets, you can still loan personal items to your LLC. You can list office space, cars, computers, and more as business expenses when filing taxes.

You’ll need a registered agent if you’re going down the route to form an LLC, as most states require them. This individual or company accepts legal and tax documents on your business’s behalf. While you can use yourself or a colleague as a registered agent, it’s advisable to use a registered agent service instead.

You can usually get a registered agent when you use an LLC formation service to file for your LLC. Registered agent services are always available to handle documents in a timely manner to avoid penalties you could otherwise face.

Corporation

A corporation separates a business entity from its shareholders (usually the owners). Corporations can be taxed, receive profits and losses, and are responsible for their actions and financial status apart from shareholders. When an owner or shareholder leaves a corporation, it should be able to continue functioning relatively undisturbed.

This business structure isn’t limited to large companies, although small ventures can struggle to keep up with the record-keeping and reporting required. There are two primary types of corporations, known as C-corporations and S-corporations.

C-corporations are more traditional businesses that may have to pay out more in taxes, first when it receives a profit and again when shareholders receive dividends. An S-corporation is a special type of business model designed to avoid the double taxation that comes with a C-corporation.

Companies wanting to pursue S-corporation status have to file additional paperwork with the IRS. Learn about the differences between an LLC and a Corporation here.

Step 2: Decide on a Business Location

Once you’ve identified the business type you’re going to register, you need to choose a location for your company. For some, this means a brick-and-mortar building in or around your city. With so many businesses forming solely online, you may just use this location for tax purposes and where your correspondence arrives.

If you have an ecommerce business, you’re not required to register it in the state you live in. In fact, there are a few states without any state taxes, limiting filings to only the federal level. This can save money if you have an address you can use in one of these locations.

Step 3: Come Up With a Business Name

You’ll need a name when registering your business for the first time. A business name must be unique, and you’ll want it to showcase your venture in a specific but clear way. Start with what makes your business stand out, and brainstorm ideas from there.

Those starting sole proprietorships and partnerships normally use an owner’s name upon business creation. If you want to call it something else, you may need to file a DBA (doing business as) document. Keep in mind that a DBA doesn’t trademark your business name from someone else using it.

While every state has its own rules about naming conventions for business registration, there are some general guidelines to follow. Depending on what you’re registering for, you’re required to include pertinent information such as “LLC” or “Inc”.

You can’t use any terminology that would confuse your organization with a government agency, including terms like “CIA” or “Treasury”. States often restrict words like “historical” or “education”, requiring additional paperwork for approval.

Once you’ve landed on a name, you’ll need to submit the paperwork to the state agency for approval. Names already registered in their system or those filed with unusable terms will be rejected at your expense. Fortunately, you can use tools like the U.S. Patent and Trademark Office to check availability.

Here’s an easy guide on how to conduct an LLC name search.

Ecommerce business owners will also want to verify domain names matching or similar to the business name are available as well. Locking in a cool name won’t do much good if your web address has to be completely different.

Step 4: Get a Federal Tax Number

State registration is essential, but you’ll also need to register your business on the federal level. Doing so requires obtaining a federal tax number for your business. This number, also known as an employer identification number (EIN), acts just like a social security number for your company.

An EIN allows you to submit your business’s tax forms to the federal and state governments alongside other necessary paperwork. The IRS makes it easy to get an EIN quickly and easily through its online EIN form. The site will also let you know if your business does not require this number.

Step 5: Acquire Licenses and Permits

Whether you’re offering products or services to your client base, you’ll want to make sure you have all the necessary licenses and permits to do so legally. These licenses and permits can differ at the federal and state level. The Small Business Administration website has a site you can use to check for licenses and permits you need by entering your industry and location.

Counties and city governments do not typically require licenses or permits for a physical location apart from what the state and the federal government requires. Still, it’s worth looking to ensure you’re not missing anything before commencing sales. Failing to have the necessary paperwork can result in costly fines or place your business at risk.

Step 6: Create a Bank Account

Registering an LLC or corporation offers a means to keep personal and business assets and funds separate from each other. The best way to do so is by opening a business bank account specific to your company.

In most cases, you need to finish the registration process of your business before you can open a bank account. You’ll need to have this documentation to prove you’re a legitimate business owner. It’s up to you whether or not to choose a bank you already have dealings with, and there’s no requirement to work with a bank in the same state you register. Some banks may require an in-person visit, so keep that in mind.

Having a separate business bank account will also help you track how much money is going in and out of your company and how profits look each month. It also looks more professional to have clients pay into a business account instead of a personal one.

What Does It Cost to Register a Business?

Registering a business in the United States is not an expensive process, even if it is a little higher than many other countries around the world. The amount to incorporate varies from state to state and depends on the type of business you’re registering.

Sole proprietorships and some partnerships don’t require registration with the state they’re a part of and avoid fees as a result. The cost to form an LLC or corporation may be somewhere between a few hundred and a few thousand when all is said and done.

Use ZenBusiness to register your business.

Registering a Business as a Foreigner

The United States grants foreigners the same ability to register a business that nationals have. This affords foreign citizens the opportunity to reap the benefits of starting an American firm, including competitive tax rates and access to a large and integrated market.

The Registration Process

Foreign citizens aren’t required to live or work in the United States for business registration. However, you must follow the same steps as an American citizen to legally start and run your company. When creating a business, you’re limited to an LLC or C-Corporation, as anyone outside the US is ineligible to incorporate an S-Corporation.

Non-Americans must also register a business in a US state and are subject to taxes, fees, and requirements that the state holds. Even if you live elsewhere, your business is still responsible for filing federal and state taxes yearly in the United States. The same rules apply for obtaining an EIN necessary to file those taxes, including having a US address.

You’ll also require a US address for opening a bank account on American soil. Most physical banks still require an in-person visit to set up an account, but digital banks are becoming popular ways to establish a US bank account without ever leaving your home.

Use ZenBusiness to register your business with ease.

Working in the US

Believe it or not, owning a business in the United States doesn’t mean you can work there. If you want to run your business from within the United States, you’ll need to get your hands on a visa.

The US offers many different types of visas, from a duration of six months to three years, with the option to extend the length with approval. Depending on the visa, you’ll be able to live and work out of the United States for an indefinite amount of time. Some visas restrict the business activities you can perform.

A green card is another way for non-Americans to register a business in the United States. Residents with a green card have no restrictions on setting up a business of any kind.

Frequently Asked Questions (FAQs) for Business Registration in the US

Business registration in the United States doesn’t have to be a daunting task. Here are answers to some of the most common questions about the topic.

Bottom Line on How to Register a Business in the US

Business registration in the United States is a relatively straightforward process once you’ve identified the type of company you want to create. The digital age has made it easier than ever to start a business, and several services offer help in making the process even easier.

All you need is some creativity, research, and enough money to cover setup fees. You don’t even need to live in the United States to own a business there, just a US address to obtain an EIN and open a bank account. Following this guide, you’re a few short steps away from registering a business of your own.

Use ZenBusiness to register your business with ease.

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12 Common Payroll Mistakes & How to Avoid Making Them

Work colleagues discussing about payroll mistakes

Payroll mistakes can leave a black mark on an otherwise exemplary company profile. Failure to comply with federal, state, or local rules can lead to crippling fees or job applicants looking beyond your business to one more accountable. This article covers 12 common payroll mistakes and the tools you need to avoid them.

1. Being Infrequent With Payments

Your employees rely on their paychecks as much as you rely on their services to make your business succeed. For some, it’s crucial to have a stable source of income at set times of the month to make ends meet. These individuals may not have the luxury of being able to wait an extra day or more for you to wrap your head around the week’s payroll.

If you commit to paying your team weekly or bi-weekly at hire, it’s wise to honor such an agreement. While there are no federal laws surrounding how often to pay employees, some states have frequency requirements and could penalize your business for missing them. Your staff can also lose trust in you, resulting in a high turnover or the inability to bring new workers abroad.

Solution: Set Up Auto Payroll

Choose one of the best payroll apps to help you prevent this payroll mistake by automatically paying employees at set intervals. These platforms can save salaries, hourly rates, and even log hours. It still may require a little work on your end to make sure everything is correct, but you’ll receive reminders to do so.

2. Miscalculating Payroll Amounts

Accounting inaccuracies can lead to under or overpaying employee wages for the work they perform. These mistakes can go unnoticed, leading to financial issues down the road. Even if you catch them, it’s time-consuming to fix the problem.

In the case of the former, you’ll need to remedy the situation by compensating the worker for the amount you owe them. Depending on when you discover the discrepancy, this can lead to an expensive billing cycle that you didn’t plan for.

On the other side of the coin, there’s no joy in having to wrestle money back from an employee whom you overpaid. Federal and state laws allow you to reclaim the money, but it can be a challenging (and hurtful) process. Some state laws do have restrictions on how this process works, adding to the confusion.

Solution: Let a Program Calculate Totals for You

To help alleviate this issue, build an employee database in a payroll software, such as Gusto, with salaries and hourly wages. You can use the platform to pay out a salaried rate every pay period and calculate totals for hourly employees by simply having your team log their hours.

3. Miscalculating Hours or Overtime Amounts

Salaried employees are pretty straightforward, and you can usually send them the same check every pay period. Hourly employees, however, are not quite so simple.

First, there’s the matter of how many hours you’ve agreed upon for them to work per week. You probably won’t pay them to eat lunch, so you need to take that time into account when calculating wages. If they end up working beyond 40 hours, it’s essential to follow your state’s guidelines for overtime and pay accordingly.

Failure to track an employee’s hours and distinguish overtime can be a severe issue. In fact, it’s illegal not to pay workers for any overtime they’re due.

Solution: Digitally Track Employee Hours

Like physical timecards of old, digital replacements offer a means for employees to clock their own hours by signing in and out online. They can use the system to record breaks for lunch and will make it easy to note how many hours beyond 40 an individual works per week. The digital record is a failsafe in case of an issue and makes it a breeze to pay hourly employees their keep.

4. Listing Employees Mistakenly As Exempt or Non-Exempt

Listing an employee as exempt or non-exempt has a bearing on whether or not they are entitled to collect overtime pay. Paying a worker for overtime when they should be exempt is bad, but failing to pay a non-exempt employee for hours worked beyond 40 is much worse.

You’re required to reimburse non-exempt personnel for overtime hours worked, and you could get penalized for not doing so in the first place. This can also lead to trust issues with employees, even when the matter is unintentional.

Solution: Understand Fair Labor Standards Act (FLSA) Guidelines

Take the time to read all FLSA guidelines to avoid making these kinds of mistakes at any time during an employee’s time at your company. For this specific matter, an employee is only exempt if you pay them a minimum of $684 per week or $35,568 as a salary, and their job duties directly affect operations.

5. Incorrectly Identifying Employees and Contractors

As a business, you have a legal responsibility to declare who your employees are and who are independent contractors. Independent contractors are usually temporary workers, and you are not required to withhold any taxes for them. They are generally outside of a business’s benefits, such as vacation time and insurance.

Misclassifying an employee as an independent contractor will lead to a large amount of payroll and income taxes due that were not properly withheld. These taxes (and fees from the misclassification) can spell disaster for a company. Learn more on how to process payroll for contractors.

Solution: Have the Knowledge to Make the Right Decision Up Front

Both the Department of Labor and the Internal Revenue Service (IRS) have tests you can use to determine if your new hire should be classified as an employee or a contractor. If you’re still unsure, you can fill out an SS-8 form to have the IRS decide for you.

6. Forgetting to Account for Vacation Time or Holiday Pay

No states require employers to offer vacation time or holiday pay in any capacity. These incentives certainly go a long way on a job description and can help fill your empty seats.

This also means it’s up to you to assign and track hours for paid or unpaid vacations and any holiday pay you choose to reward your staff with. You may not reward all your employees the same way, and workers will take vacation at different times of the year. It becomes easy to overlook paid leave or incorrectly accrue paid time off.

Solution: Use Software for Tracking Rewards

The simple solution is to use a system that logs and tracks paid time off and holidays for you. It can also accommodate employees who accrue vacation days faster than others. Best of all, employees can request vacation days within the app, and it will automatically deduct time after your approval.

7. Overlooking Payroll Taxes

Each time payroll goes out, the government needs to collect taxes on those amounts. These taxes can come from the federal, state, and even the local level. To add to the confusion, your company may not be required to pay every tax. Failing to submit the proper taxes results in fines to your business.

Solution: Do Your Tax Homework

Take the time to understand all the tax laws that apply to your business. Be sure to travel from the federal level down to your local community so you don’t miss anything that could bite you later.

Keep in mind that this isn’t a one-time process, as payroll tax laws can change seemingly overnight. Even if you’re not in the know, you’re still responsible for paying the correct amounts at each government level. Some payroll apps can acquire this information for you after entering your city and state into the system.

8. Missing Tax Deadlines

You need to pay payroll taxes regularly, but the same holds true for income taxes. As a company, you must withhold an amount from your employee’s wages. Income taxes are typically due on April 15th every year for U.S. companies.

Employees use W-4 forms to decide how much they want withheld for income tax. It is your responsibility to correctly do so and get those funds to federal, state, and local officials in time. Since each employee withholds a different amount, the process quickly becomes confusing. One mistake can lead to penalties or fees from the government.

Solution: Hire a Tax Expert

It’s never a bad idea to bring in an accountant or tax professional to help you set up your system and calculate withholdings. It’s a time-consuming process that you’ll want to have someone focus on until you’ve ironed out all the kinks.

Beyond human help, some payroll software solutions can automate this process for you, sending out the correct payments to government agencies as needed.

9. Not Keeping Payroll Records

Not keeping a detailed payroll record for your business is a big no-no. The Fair Labor Standards Act (FLSA) requires companies to keep meticulous payroll records for three years before you can dispose of them. The IRS would like to be able to see tax information up to four years after filing.

Doing your entire payroll by hand can lead to multiple boxes of physical paper by the time those three years are up, especially if you have a larger staff. It can be a chore to dig through all that information to locate the one file you need to prove your case when a discrepancy arises. 

Failing to provide this information when requested leads to headaches with the government and applicable fees and penalties.

Solution: Keep Your Records Digitally

Logging all your payroll information in a digital format reduces your reliance on paper and requires nothing more than a computer to store locally or cloud storage. It becomes easy to locate information in a pinch through search filters and sorting through specific timeframes.

Read: How To Conduct a Payroll Audit For Small Business in 8 Steps

10. Lacking Backup Records

You could lose all your payroll records in the event of a catastrophe in your place of business. Natural disasters leave little time to locate pertinent documents or computers that house this essential data. Disaster or not, you must have access to these records at any given time.

Solution: Back Up Your Files

You should always keep a backup of these documents or files off-site in the event something does happen to the originals. The simplest solution is to put the data on an external hard drive or use a cloud service to access them from anywhere.

11. Failing to Stay Up to Date With the Latest Laws and Regulations

Laws and regulations designed to protect your business and your employees change all the time. As new programs emerge, missing out on key details could leave you playing catch up with new requirements that can cause delays in processing or penalties for noncompliance. Missing a change to minimum wage, for instance, could leave you playing catch up with money you didn’t budget for.

Solution: Follow the Letter of the Law

Having an acute eye on updates to payroll regulations in your state can save you time and money. Being able to proactively make changes typically results in a smoother process than trying to recover down the road.

12. Training Too Few People on How to Use Payroll

Once you have your payroll system up and running, you want to make sure it keeps rolling smoothly along the tracks. You can’t always be bothered to run the numbers every time payroll is due, and many companies make the mistake of teaching just one other person how to handle such a monumental task.

Vacations and sickness creep in, and payroll can fall through the cracks if this person isn’t around to send everything out on payday. Even if someone else does step forward in a pinch, this can lead to payments not processing in time or costly mistakes with the data.

Solution: Train a Team of People

Think through worst-case scenarios, and then train a team of people how to do payroll, so they can handle all (or portions of) payroll when the need arises. Such a move can prevent issues that can lead to upset employees or loss of trust that can hurt work morale and performance.

Bottom Line on Payroll Mistakes

Staying up to date with all the rules and regulations surrounding payroll can be a daunting task. Payroll mistakes can be simple oversights, but still wreak havoc on budgets, employee satisfaction, and your company’s desirability as a place to work.

Fortunately, payroll software tools can help navigate a lot of these nuances for you. These services can automate payments, file taxes for you, and even alert you when a new regulation comes down the pipeline. No matter what, staying compliant is vital for having a fruitful business for years to come.

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How to Register a Domain Name in 4 Steps 

Domain name registration concept

Registering a domain name is one of the first few important steps in getting your website up and running. It won’t take you more than a few minutes to register a domain name, but it does need some thought. Coming up with a suitable domain and registering it correctly ensures you get off on the right foot in building your online presence. 

How to Register a Domain Name In 4 Steps 

Domain name registration won’t take you more than a few minutes, even if you’re a beginner. That said, choosing a unique domain name and making sure it’s available is the hard part. If you go with a quality domain registrar, it’ll facilitate you through the next steps until you’re ready to get started with web design. Here’s a step-by-step guide to registering your domain name in just a few minutes.

Screenshot of Bluehost Domain Names page
Source: Bluehost

Step 1: Find a Suitable Domain Name Registrar

You can’t register a domain name on your own. The ICANN (Internet Corporation for Assigned Names and Numbers) controls domain registration on the world wide web and has accredited private companies as domain registrars. These companies reserve, register and manage the domain on your behalf.

Finding a suitable registration service takes precedence over choosing a domain name because the right registrar will facilitate the domain finding process. You’ll find hundreds of domain registrars out there, but you’re better off sticking with the most popular ones. We’ve shortlisted three of the best domain registering services below:

1. Bluehost

Bluehost is a leading domain registrar that offers a vast range of services including web hosting, website building, and professional marketing services. You can buy a .com domain from Bluehost starting from $12.99/year. You might as well get a free domain with its shared hosting or website builder packages.

2. HostGator

HostGator is a web hosting service that also offers domain registration. You can register a .com domain with it for as low as $12.95/year. You can also transfer a domain you already own to HostGator. Like all quality registrars, HostGator offers a free domain if you buy one of its hosting plans. 

3. Namecheap

Namecheap is one of the most popular and cheapest domain registration services out there. You can get a .com domain with this registrar for as low as $0.98. Namecheap also offers the most affordable hosting plans that come with a free domain name. Go for this one if you’re working on a tight budget and don’t want to compromise on quality.

Step 2: Choose a Domain Name

If you’ve already finalized your brand’s name, your domain name should ideally be the same. But this is only possible if that domain name is available. In case it’s already taken, you’d have to work around a similar domain with a few extra characters or a different extension. 

But if you’re starting a business and still deciding on a name, it’s better to take both processes together. Your domain name should be short and sweet, easily memorable, and should be relevant to your business and what you represent. 

Finding the perfect domain on the first search is rare. Consider yourself lucky if you do. If the domain you’re looking for is already registered by another individual or company, you’d find yourself on a result page like this:

Screenshot of Bluehost domain search when a domain is unavailable

In this case, the registration service offers you similar domains with different extensions. Note that if you see a domain is unavailable on one domain name registration site, you won’t be able to get it on another. All registrars use the same database from ICANN.

Step 3: Complete Domain Registration

If you’ve found an available domain, proceed to purchase it. This is one of the easier steps and you’re only required to enter your credentials and make a payment.

The registration service asks you for your billing information and payment information. Click on the purchase button and voila, you’ve registered a domain name. 

Screenshot of Bluehost domain name registration, billing information page.

You need to remember that a domain is not a one-time purchase. It’s more like you’ve rented that domain name for a year and will have to pay a recurring fee every subsequent year. At most, you can buy a domain name for 10 years by prepaying at once. 

Step 4: Verify Domain Ownership

You can’t get your website live on your domain immediately after buying it. It can take some time for the domain registrar to update the official domain registry before you can work on it. This may take a few minutes or up to seven days. The average waiting period is about two days. 

Finally, you’ll receive a registration confirmation email at your email address when the process is complete. Depending on your registration service, you may or may not receive a verification link inside the email. Click on the link to verify your contact details and complete domain registration. 

Which Domain Registrar is Best? 

Having trouble deciding which domain name registrar to go with? In this section, we’ve summarized the best features, pros and cons, and pricing plans for the top registration services to make your decision easier.

Bluehost logo

Bluehost

Visit

Bluehost isn’t the cheapest option but if you’re looking for the most reliable domain registrar and web host on the market, this is it. Apart from domain registration, Bluehost offers a vast range of services which makes it a one-stop solution to build your website from scratch. 

Its current popular web hosting plan gives you a free domain for one year, and a free SSL certificate at just $2.95/month. However, the plan will renew at higher regular rates.  Read the Bluehost review to learn more.

  • Low starting prices
  • Reliable uptime
  • Easy domain management
  • Higher renewal prices
  • Not the cheapest domain registrar
  • Constantly tries to upsell services

Pricing

If you want to purchase a domain only, Bluehost lets you register a .com domain at $12.99 for the first year. Expect the renewal rate to be higher. Of course, you can get a cheaper domain too but that will have a different extension. Here are the starting prices for different domain extensions offered by Bluehost.

Screenshot of Bluehost domain name prices
HostGator logo

HostGator

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Hosting over 10 million domains, HostGator is one of the most popular names in the industry. It was originally a hosting service that gradually expanded its services to domain name registration and website building. 

HostGator’s all-in-one package includes hosting, a free domain, an SSL certificate, and easy WordPress installation starting at $2.75/month. Read our full HostGator review for an in-depth look.

  • Transparent pricing
  • 99.99% uptime guarantee
  • Responsive customer support
  • Plans renew at higher rates
  • SEO tools, backups cost extra

Pricing

The starting price of registering a .com domain with HostGator is $12.95/year. This’ll renew at $18.99 for subsequent years. These prices are slightly lower than those offered by Bluehost. Here are the prices for some domain name extensions from HostGator.

Screenshot of domain extension prices from HostGator
Namecheap logo

Namecheap

Visit

As the name suggests, Namecheap is essentially a domain name registrar and not just any registrar. It offers domain names for the lowest prices out there. Not just that, Namecheap also offers quality web hosting services now. Its web hosting plans are quite affordable too.

Namecheap’s shared hosting plan offers a free domain, hosting, 20GB SSD storage, and free CDN. All this comes at a starting price of $1.88/month. You pay $21.88 for the first year, but this plan renews at $42.88. Read our complete Namecheap review to learn more about its features.

  • Most affordable domain registration
  • Transparent pricing
  • Quality hosting
  • Inconsistent customer support
  • Higher renewal rates
  • Charges domain transfer fees

Pricing

As mentioned above, NameCheap offers domain names at one of the lowest prices. You can get a .com domain name for as low as $0.98 with current promotions. However, the usual prices are higher. Here are the current domain registration prices from NameCheap.

Screenshot of domain registration prices from NameCheap.

How to Choose the Perfect Domain Name 

Your domain name shapes your brand identity. A well-chosen domain name serves you well in every department from branding to developing your site’s SEO strategy. This is why we recommend putting time and thought into choosing the perfect domain. Here’s a short guide just for you.

  • Your website domain should represent your brand: If your brand’s name is Apple, then your domain should ideally be apple.com. We understand that this is not always possible, we’ll come to that later.
  • Choose a short domain name: The shorter it is, the better. Longer names are difficult to remember and don’t look as catchy. Aim for something in the range of six to 14 characters. 
  • Include a keyword you want to target: Your domain identity contributes to your site’s SEO. If you’re starting an online store that sells tires, include the keyword “tires” in your domain to rank better.
  • .com is king: If you can find an ideal .com domain, it should be your first choice. This is simply because .com domains are the most popular. However, there are no technical or SEO reasons why you shouldn’t go with a different extension. 
  • Avoid numbers and special characters: Try to stay away from numbers and any other special characters in your domain. It’s better to stick with letters only. 

What to Do if Your Desired Domain Name Is Unavailable? 

Fret not. There’s always a workaround. If you are willing to change the domain a little bit, try the following:

  • Add a suffix: If the domain newyork.com is unavailable, try adding a suffix and searching for names like newyorkcity.com or newyorklove.com. Adding a short word and relevant at the end of your desired name can help.
  • Add a prefix: Similarly, you can try adding a word before the domain name. For example, if computers.com is unavailable, try techcomputers.com or thecomputers.com. 
  • Try a different extension: This is a brilliant solution to keep the same words but with a different top-level domain. This also adds novelty and uniqueness to your website’s identity. For instance, try switching tech.com with tech.io, tech.ai, or tech.org. 

But if you’re adamant about getting your hands on an unavailable domain, try searching for it on your browser’s search bar. If it’s up for sale, you will find yourself on a page that mentions the domain is for sale and gives you the owner’s details so you can negotiate a price. 

If a domain has an active website on it, it’s unlikely the owner will sell it anytime soon. But you can try your luck by reaching out to them and proposing a deal. 

When Should I Register My Domain Name?

The answer seems obvious: register a domain when you want to build a website. But it’s not that simple. The thing is, good domain names are purchased quickly and you need to act swiftly in order to secure the perfect domain name for your business.

If you’ve come up with an excellent domain name for your website and you’re not ready to build a site yet, you should still purchase it right away. You never know when someone else will buy it. Registration services like Namecheap are best for reserving your domain name at the lowest price. 

Even if you’re unsure about whether you’ll be able to build a website in the future, you can still buy a good domain as an investment. You can always sell it at a higher price to someone who needs it.

Frequently Asked Questions (FAQs) for How to Register a Domain Name

If you have more questions about domain registration, here are some of the most common questions people ask about it and the answers to them.  

Bottom Line on How to Register a Domain Name

Registering your domain is an essential but simple step in building a website. All you need to do is choose a suitable domain name, find a registrar and register it within a few minutes! Coming with the ideal name remains to be the toughest part where you have to consider multiple factors. You may have to go with an alternative because your first choice will not always be up for grabs. 

That said, choosing the right registrar is also crucial. The right registration service can help you get a domain for free along with a free SSL certificate if you buy one of its hosting plans. We’ve shortlisted Bluehost, HostGator, and Namecheap for the best domain name registration services at a reasonable price. 

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How to Process Contractor Payroll in 6 Steps

Contractor payroll concepts

Contractor payroll is an organized process that enables you to pay independent contractors and freelancers. It is an essential procedure for you if you hire people to perform services for your business. An independent contractor is a temporary employee, while a freelancer is a self-employed, nonpermanent worker.

Learn how to manually complete the freelancer payroll process in six steps. Find out how to pay contractors using Square Payroll in three steps. Discover which one is easier: processing payroll manually or using software like Square Payroll.

How To Complete Contractor Payroll in 6 Steps

The payroll process for independent contractors and freelancers is different from the payroll procedure for employees. You can conduct the freelancer payroll process using a manual method. Follow the steps below:

Contractor Payroll Process Summary

Step 1: Make a Payment Agreement

Establish payment rates, payment periods & tax requirements of contractors

Step 2: Request W-9 Forms

Require freelancers to submit Form W-9

Step 3: Record Contractor Data

Input the personal data, tax information & bank account details of contractors

Step 4: Compute Contractor Payments

Calculate payments at the end of each cycle

Step 5: Make Contractor Payments

Use your preferred method to pay contractors

Step 6: Submit 1099-NEC Forms

Fill out Form 1099-NEC for all contractors paid over $600 within the year

Step 1: Make a Payment Agreement

First of all, make a clear payment agreement with contractors and freelancers. Temporary workers are not paid a regular salary like permanent employees. Instead, they are compensated based on the projects they completed or the time they spent working. That’s why you should determine three factors at the beginning of the process:

Payment Rates

How much should you pay the contractor? On one hand, each freelancer has his or her own standard rate as a professional. On the other hand, you have your own budget as a business owner for hiring a freelancer for the job. Together, settle on an hourly, weekly, monthly, or per-project rate that meets your mutual requirements.

Payment Period

How often should you pay the contractor? Establish the frequency of payment, whether it be weekly, bimonthly, or monthly. Estimate the period of time that you expect the person to be working for your business. Predict the approximate working period based on the length and complexity of the projects or tasks you hired the worker to perform.

Tax Requirements

What are the tax requirements of the contractor? Most contractors pay taxes independently so you do not need to withhold taxes on their behalf. Keep this in mind as you negotiate payment rates with freelancers.

Step 2: Request for W-9 Forms

Ask the contractors and freelancers you hired to fill out a Form W-9 before they start working for your business. This Internal Revenue Service (IRS) tax form is also called Request for Taxpayer Identification Number and Certification. It requires workers to provide their name, address, federal tax classification, and Taxpayer Identification Number (TIN).

W-9 form for contractors and freelancers

The W-9 form is a requirement for U.S. citizens and permanent residents whom you employed on a contractual or freelance basis. You need this form to report the annual earnings of temporary workers via the Form 1099-NEC at the end of every year.

Step 3: Record Contractor Data

Manually input the personal and tax information of your contractors in your payroll system after they submit the Form W-9. Save the banking details of the freelancers if they opt for direct deposit. Record the data in the payroll system of your business via paper records or computer spreadsheets to make accurate payments and deposits to your freelancers.

Step 4: Compute Contractor Payments

Calculate the payment of your contractors at the end of each weekly, bimonthly, or monthly payment cycle. Compute the amount based on the freelancer rates multiplied by the number of hours they worked or projects which they completed within the period. You may perform computations using a manual calculator or a digital spreadsheet.

Step 5: Make Contractor Payments

Select the payment option that works best for you and your contractors. Make a payment based on your preferred method:

  • Direct deposit: You can deposit the payment straight to the bank account of the contractor. Take note that direct deposit processes usually take a few days to complete.
  • Cash: You may pay contractors in cash in case they currently don’t have a bank account.
  • Check: You can print checks which you can mail to your contractors or hold in the office for pickup.
  • Prepaid debit cards: You can issue pay cards to your freelancers which you can reload during each payday.

Step 6: Submit 1099-NEC Forms

Fill out and submit a Form 1099-NEC for every contractor who received over $600 from your business during that year. Indicate the total amount you paid annually to each person. Submit copies of the form to the IRS and state tax agency. Furnish the contractor with a copy so they can compute how much in taxes they owe. Keep a copy of each form for your business records as well.

1099-NEC Form for contractors being paid over $600 annually

How to Process Contractor Payroll Using Square Payroll in 3 Steps

As an alternative, you can use Square Payroll if you want a more convenient method to complete the freelancer payroll process. We recommend this online payroll software because it lets you make contractor payments in a faster, easier way.

Screenshot of Square Payroll's payment page

Square Payroll is best for small businesses that hire contractors because of its useful features and seamless integrations. Follow the steps below to begin using Square Payroll:

Square Payroll Process Summary

Step 1: Add Contractors to Square Payroll

Register contractors in the software system

Step 2: Prepare Contractor Payments

Select the pay period dates & payment method + Input contractor rates, hours & commissions

Step 3: Make Contractor Payments

Review data & submit payments

Step 1: Add Contractors to Square Payroll

Click on “Add Team Member” and “Create New” to register new independent contractors in the Square system. Enter their personal data, including the first name, last name, and email address. Select the contractor employment type, payment type, and payment method for each person. Input their bank account information if they prefer to be paid via direct deposit. Generate a Point of Sale Passcode in case you plan to use Timecards.

Click on “Save” to complete the registration. The data you saved will be recorded in the system so you don’t need to keep entering it repeatedly each payment cycle.

Step 2: Prepare Contractor Payments

Proceed to the “Payroll” menu of your Square dashboard. Click on “Pay Contractors.” Choose the pay period dates and payment method. Select the contractors you wish to pay. Input the rates, hours, and commissions of the freelancers. If you are using Timecards or Commission Tracking, click on “Import time and wages” to automatically sync the hours and commissions in the system.

Step 3: Make Contractor Payments

Once the information is complete, click on “Continue.” Check the contractor payment details carefully to confirm that all the data is correct. Finally, click on “Submit Payment” to start the payment process. The contractors who are paid via direct deposit will receive the amount approximately four days afterwards.

Run Contractor Payroll Using Other Payroll Software

While Square Payroll is our top choice, there are other contractor payroll software that you can try. We suggest these programs as alternatives because they are capable payroll tools in their own right.

Gusto

Gusto is an all-purpose payroll platform that equips you to hire and pay employees and contractors. It allows you to focus on team management through its multifunctional features, such as full-service payroll, hiring, onboarding, time tracking, attendance monitoring, talent management, and insights reporting.

Screenshot of gusto Run Payroll payment page

Contractors have the option to self-board online and to receive payday email messages. Gusto is commendable because it expedites payment processing for workers.

ADP Payroll

ADP Payroll is a payroll and HR tool that enables you to pay and manage your contractors and employees in a quick, simple way. It offers built-in features which cover taxes, compliance, hiring, and HR support. The personalized dashboard lets you access your payroll to-do list, payment history, and flexible payment methods. Its handy add-ons and integrations increase its functionality.

Screenshot of ADP Payroll website pages

This software helps you with tax reporting by automatically generating Forms 1099-NEC for the contractors you hired. Consider using ADP Payroll because of its 24/7 customer service availability and customization options.

SurePayroll

SurePayroll is an online payroll service that is easy to use. It streamlines the payroll process for your contractors and employees through its automatic payroll, tax calculation and filing, and direct deposit setup features. It is possible for you to set up and run this tool in just a few minutes.

Screenshot of SurePayroll payment page

This platform enables you to complete your contractor payroll together with your employee payroll through a single process. Based on a SurePayroll review, it is ideal for small businesses because of its affordable pricing and simple UI.

What You Need To Learn About Contractor Payroll

Boost your expertise on the freelancer payroll process by increasing your knowledge about payroll matters. Learn the definition of payroll and contractor payroll. Discover who can be considered as independent contractors and freelancers. Find out what exactly Square Payroll is.

What Is Payroll?

Payroll is the systematic process of computing and distributing the salary of employees of a business. It also involves the calculation of taxes and the documentation of the procedure. It covers payment cycles which can be set for weekly, bimonthly, monthly, or custom periods. 

A payroll system ensures that you compensate your workers with the right amount at the right time. You have the option of carrying out your payroll tasks through a manual method or digital method using cloud-based solutions or on-premises software. Selecting the suitable payroll tools for you is vital so you can minimize time and costs when preparing payments for your freelancers.

In small startups, the business owner or associate typically handles payroll processes in small startups. In large companies, HR or accounting team members are usually responsible for payroll procedures. Some business teams choose to outsource payroll tasks with agencies, although this leads to extra expenses.

What Is Contractor Payroll?

Contractor payroll is the organized process that is tailored to the payment of independent contractors and freelancers. It is commonly used to compute and disburse the compensation of temporary workers based on payment rates and pay periods. It is also used to collect and record the personal data and tax information of freelancers and contractors. You can process contract payroll either manually or by using software solutions.

Who Are Contractors and Freelancers?

Independent contractors are nonpermanent workers who typically perform long-term projects for businesses. Freelancers are self-employed temporary workers who are usually assigned short-term or long-term projects for clients. Both contractors and freelancers may offer services or products to various organizations since they are not tied to a single employer.

Freelancers and contractors do not receive a regular salary like permanent employees. Instead, both are paid based on the projects they completed or the time they spent working for the client. That’s why there is a special payroll process for contractors and freelancers.

What Is Square Payroll?

Square Payroll is a payroll tax software that is especially designed for small businesses. It enables you to pay your contractors and employees quickly through your Square Checking account and balance. Also, it automatically files your federal, state, and local payroll taxes. And you can use it to track your freelancers’ time by syncing with timecards.

Square Payroll smoothly integrates with other related tools. Its mobile app enables you to make payments even when you are on the go. It has straightforward pricing and affordable rates. It offers technical support through live payroll service specialists who can guide you in navigating the platform and troubleshooting issues. Read our Square Payroll review to find out more about its features and pricing.

Frequently Asked Questions (FAQs) for Contractor Payroll

Contractor payroll can be intimidating especially if you are not familiar with the process. Become more confident in tackling your freelancer payroll tasks by discovering the answers to the basic questions on contractor payroll matters.

Bottom Line on Contractor Payroll

It is possible for you to manually complete the contractor payroll process in six steps. However, you can save time and effort by using freelance payroll software which simplifies the procedure into three steps.

We recommend Square Payroll if you need an excellent contractor payroll platform for your small business. Start using it now to experience its powerful payroll features, cost-effective pricing, and accessible customer support.