Quick Answer

Should I run payroll myself or use a payroll service? You should either use a dedicated payroll service or hire an accountant. Running payroll entirely yourself using manual spreadsheets is a compliance risk that leaves you solely responsible for tax calculations and rigid filing deadlines. A payroll service automates tax withholding and deposits at a predictable monthly cost, while an accountant charges a premium to handle the process entirely for you.

Before making your choice, you must establish your business entity and secure an Employer Identification Number. You can handle formation and the EIN through ZenBusiness, which partners with ADP to route your payroll setup once your business is legally established. This foundational step must happen before you issue your first paycheck.

The Reality of Manual Payroll Operations

Small business owners often attempt to manage their very first employee using basic spreadsheets. This approach places the entire burden of federal tax tables and state unemployment brackets directly on your shoulders. You must manually calculate withholdings for every pay period and remember to submit the correct tax deposits on time. Missing a deposit deadline automatically triggers penalties from tax authorities.

Manual payroll also requires you to stay constantly updated on changing tax laws. You have no safety net if you miscalculate an overtime rate or apply the wrong tax bracket to a bonus payment. The sheer volume of administrative work quickly consumes hours that should be spent growing the business. This reality drives most founders to choose between a software service and a professional accountant.

The Role of the Small Business Accountant

An accountant brings deep professional expertise and interacts directly with tax agencies on your behalf. If you receive an IRS notice regarding an underpayment, your accountant investigates the issue and drafts the formal response. They ensure that your payroll expenses sync perfectly with your broader corporate tax strategy. This completely hands-off experience gives founders maximum peace of mind.

This level of service comes at a high price point. Accountants bill for their time, meaning complex pay runs or sudden off-cycle bonuses will increase your monthly expenses. You also lose real-time visibility into your payroll data. If you want to check an employee's historical pay stub, you usually have to request it from the accounting firm rather than pulling it yourself.

The Mechanics of Dedicated Payroll Services

Using a payroll software platform transfers the data entry work to you while automating the math. You log the hours, review the totals, and click a button to approve the pay run. The software engine then calculates the withholdings, issues the direct deposits, and files the required federal and state forms automatically. This gives you total control over the timing and execution of your payroll.

Software typically offers the best balance of cost and compliance for employers hiring their first team member. Modern platforms include self-service portals where employees can download their own tax documents and update their banking details. The subscription fees remain predictable even as you add more employees to the system. You perform the final review, but the software handles the heavy lifting of compliance.

Laying the Legal Groundwork Before the First Paycheck

Many founders treat payroll as a separate errand from starting their company. Payroll is actually the final step in a sequence that begins with proper business formation. You cannot run payroll without an Employer Identification Number. The IRS treats the employer as the legal entity, meaning your business must officially exist before you can hire anyone.

Someone forming a business today needs the legal entity, the EIN, a separate business checking account, and a bookkeeping system in that exact order. Securing your EIN is the hard dependency that allows you to hire employees and set up your tax accounts. Only after these foundational pieces are in place does choosing a payroll method make sense. A unified approach prevents the common mistake of mixing personal and business funds. The U.S. Small Business Administration provides overarching guidance to help owners hire and manage employees systematically.

Strict Rules You Must Follow Regardless of Your Choice

Whether you hire an accountant or use software, the legal obligations of an employer fall squarely on your shoulders. You must gather precise paperwork during the onboarding process. All U.S. employers must properly complete Form I-9 for every individual they hire for employment in the United States. You also need the employee's exact name and SSN to enter on Form W-2 at the end of the year.

Tax withholding begins with the correct forms. Ask all new employees to give you a signed Form W-4 when they start work. Make the form effective with the first wage payment. A W-4 remains in effect until the employee gives you a new one. Where a replacement is given, withholding begins no later than the start of the first payroll period ending on or after the 30th day from the date you received the replacement Form W-4.

Determining Worker Classification

Companies sometimes attempt to classify workers as independent contractors to avoid payroll taxes. Classification turns on control, not on a label or a written contract. The IRS weighs three categories: behavioral control, financial control, and the type of relationship. There is no magic or set number of factors that makes the worker an employee or an independent contractor and no one factor stands alone in making this determination.

Misclassification has a steep price for business owners. An employer who classifies an employee as an independent contractor without reasonable basis may be held liable for employment taxes for that worker. Form SS-8 asks the IRS to determine status formally. It may take at least six months to receive a determination on your filing.

S Corporation Owners and Reasonable Compensation

Founders who structure their businesses as S corporations face unique payroll requirements. S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made. The IRS actively monitors these payment structures. The agency has the authority to reclassify payments made to shareholders from non-wage distributions to wages.

Pay Frequency and Record Retention

Federal and state agencies dictate when and how you pay your staff. Pay frequency is set by state law and varies widely across the country. California requires wages at least twice per calendar month on days designated in advance. Colorado requires monthly payments.

Connecticut requires weekly pay unless a longer interval is approved by the labor commissioner. Workers' compensation insurance obligations also vary sharply by state. You must point your research toward your local state authorities rather than relying on federal assumptions. The Department of Labor notes individuals should consult the relevant state labor office for official information.

Once you issue paychecks, strict archiving rules apply. FLSA payroll records are kept three years. The records wage computations are based on, including time cards and wage rate tables, must be retained for two years.

Software and Service Options for the First Hire

The providers below represent the most common software options for managing payroll. The order is purely alphabetical and does not represent a ranking. Prices were verified as of October 6, 2026.

ADP

ADP is one of the largest payroll processors in the world. The company offers a product called RUN Powered by ADP, which is built specifically for businesses with 1 to 49 employees. ADP does not publish payroll pricing and quotes per business.

Gusto

Gusto is a dedicated software platform focused heavily on modern interfaces and employee self-service tools. As of October 6, 2026, the Simple plan costs $49 per month plus $6 per person. The Plus tier runs $80 per month plus $12 per employee. Gusto also offers a Premium tier priced at $180 per month plus $22 per employee for complex workforce needs.

OnPay

OnPay offers a streamlined approach to payroll by eliminating tiered feature plans. The service includes all of its core payroll and human resources features in a single pricing model. The cost is $49 per month plus $6 per worker. The public page quotes a start price of $55 per month, which represents the base fee plus a single active employee.

Patriot Software

Patriot Software is cheaper at the very bottom end of the market and provides a strong alternative for owners watching every dollar. The Basic Payroll package costs just $17 per month plus $4 per employee. The Full Service tier costs $37 per month plus $5 per employee. It handles local tax filings alongside federal and state requirements.

QuickBooks Payroll

QuickBooks Payroll integrates seamlessly into the broader Intuit accounting ecosystem. The Workforce Payroll combined with Simple Start costs $88 per month plus $6.50 per employee. The Essentials combination costs $125 per month plus $6.50 per employee. The Workforce Premium paired with Plus costs $203 per month plus $10 per employee.

Intuit frequently changes its discounts to attract new businesses. The company currently offers a promotional rate of 50 percent off the base fee for three months. This promotional discount does not represent the ongoing price of the service.

ZenBusiness

ZenBusiness provides one place to set up and run the business, with payroll handled by a partner. The company houses the formation, the registered agent, the EIN, the bookkeeping, and the website. ZenBusiness recommends RUN Powered by ADP for your actual payroll processing needs. ADP is a separate service with its own platform, its own billing, and its own support.

The payroll function is not integrated into the ZenBusiness dashboard. A ZenBusiness customer requests the connection directly from their dashboard. An ADP representative then follows up to discuss your employee count and pay schedule. While ZenBusiness customers may be eligible for promotional pricing from ADP, the specific quotes vary by business.

Payroll itself is handled entirely by ADP and is not included in any ZenBusiness plan price. ZenBusiness sells the EIN at $99 standalone, and it is included from the Pro plan up. The Starter plan costs $0 plus state fees, while the EIN and operating agreement are $99 each on Starter. The Pro plan costs $199, and the Premium plan costs $299.

Pro and Premium renew at their annual prices. The company also offers registered agent services at $199 per year. Bookkeeping is available through Money Pro at $30 per month. You can also add website tools for $129 per year.

Sources

This is general information rather than legal, tax or accounting advice, and requirements vary and change.