Should You Outsource Payroll as a Solopreneur or Freelancer? Top 3 Options to Consider.

When you think of a solopreneur, the word “solo” is the most important part. Becoming a solopreneur or a freelancer means that you are running a business for yourself. But it doesn’t have to mean that you’re in business “by” yourself. There are lots of ways to get help with the administrative aspects of running your business.

As your business grows, you may want to consider bringing on support services for different areas of your business either to save time or increase accuracy. One sector of business that many solopreneurs and freelancers consider outsourcing is payroll services. If you consider the value of your time, using payroll software (including payroll tax calculators) for small business could be a quick, easy and affordable way to save hours of time that you can dedicate back to growing your business.

There are two primary ways to outsource your payroll:

1. Hire a vendor: You can outsource to a third-party vendor to run payroll for your company, whether it’s an accountant or payroll processing vendor. Outsourcing payroll to a third party maximizes the benefits of payroll, but you will have to spend money on the payroll services and might have less control than you would have by managing your own payroll in-house.
2. Buy software: You can also find various options for payroll software for small business. Payroll software is typically going to be a less expensive option than a third-party vendor, but will still require some of your time to process.

As a solopreneur or freelancer, your best choice might be to start with payroll software. Solo business owners have simple payroll needs that might not be the right fit for a vendor; payroll software for small business can often help you do everything that you need for a business of your size.

So where do you begin to find the right payroll for a solopreneur solution or freelancer payroll service? Let’s take a closer look at the fundamentals of outsourcing payroll, so you understand more about what payroll software can do for you. Payroll software for freelancers or solopreneurs should do more than just cut checks.

Why Solopreneurs Need Payroll

If you're a freelancer or solopreneur, you might wonder: "Why do I need payroll software or outsourced payroll help in the first place? Isn't my business too simple to require this level of support?"

It's true that as a solopreneur or freelancer, you don't have employees. So your payroll needs are simpler than a larger business. But here's the thing: payroll can be complicated, even if you're doing it just for one person. Even if you're the only employee of your business, if you're paying yourself a salary, you need to manage payroll taxes and the various withholdings for state, federal and local taxes. And it's important to do payroll the right way, especially if you own a single-member LLC and are filing as an S Corp.

Starting out with payroll software or outsourced payroll support can help your business do things the right way and stay compliant with your tax obligations, even as a solopreneur. If your business grows in the future, you might also start using contractors and vendors or hire your first employee. Making sure your payroll is right can help create a stronger foundation for your business's future growth.

A payroll service or payroll software can help your business with:

• Processing direct deposits
• Calculating gross and net pay for tax purposes
• Taking care of tax withholdings
• Managing health insurance and other employee benefits

One of the biggest benefits of outsourcing payroll is that it helps you as a business owner to save time and to focus on your strengths. Do you really want to spend time each month calculating payroll taxes and dealing with the complex details of payroll processing? Wouldn't you rather pay a small fee for an expert accountant, payroll service or payroll software and stop having to deal with payroll all by yourself?

Most solopreneurs do not enjoy doing payroll and are not experts at payroll. Taking payroll off of your to-do list can free up valuable additional hours for you to run your business, find new customers and think about things that are much more important to your profitability.

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Top 3 Factors to Consider When Outsourcing Payroll

Payroll software for small business can offer a lot of different features to help your business. But if you’re trying to choose the right payroll solutions for your company, there are three criteria that are most important to consider when you are researching payroll services for your small business:

1. Cost: Anytime you outsource an in-house process, you should consider costs. Payroll software might be cheaper than hiring an accountant or other third-party vendor to manage your payroll. Your costs might depend on how many checks are going out, as many payroll processing vendors charge per check. If you are a solopreneur and have formed an LLC, you probably only have one person on your payroll — you. This might make it easier (and cheaper) to use payroll software than to hire a vendor.
2. Time: You might be tempted to just manage payroll yourself to save money on monthly software fees. But as a solopreneur, your time is your most valuable asset. How much time do you spend doing payroll? Do you feel comfortable earmarking this time to payroll, or could your time be better spent elsewhere? Managing payroll can be complicated, and it might be costly to your business if you make a mistake. If you don’t feel entirely comfortable with managing your own payroll, or feel like you are spending too much time on payroll, it might be best to outsource it.
3. Convenience: Many payroll software companies offer integrated mobile apps, meaning you can access your business payroll anytime, anywhere. That creates clarity for you, as well as putting the information at your fingertips. However, this convenience does come with a cost. Putting your payroll information with a third party means that your private company data is passing through a third-party system. Make sure to learn more about the security standards of the payroll software or vendor that you choose, and only work with a reputable company.

What Is the Best Payroll Software for a Small Business?

Deciding on payroll software can be complicated at first glance. There are a number of options online, and they all tend to offer similar features and benefits. As with most things small business-related, the best payroll software for you will depend on the specific needs of your business. Understand where you need help and what you want the software to do before you make the investment of time and money getting it set up.

With that said, at present, Gusto has received industry-wide recognition as some of the best overall payroll software for small businesses. PCmag.com rated Gusto as “Best for Startups and Very Small Businesses,” and Business.org rated Gusto “Best overall.”

Gusto offers a very competitive cost structure with a base price and per person charges each month. If you want to move beyond their core offering, the price increases along with services provided, which means you can tailor it to your needs, and they will grow with you.

If you’ve never heard of Gusto and you are looking for a company you have heard of or already work with for your small business accounting, QuickBooks is also known for their payroll software, which is considered quick to set up and easy to use. QuickBooks is frequently featured in the conversation about best payroll software for small businesses, and if you already use QuickBooks for your bookkeeping, you might feel comfortable and save time by using it for your payroll too.

At the end of the day, the best payroll software for your business is the one that aligns with your needs. If you’re a solopreneur or owner of a single-member LLC, perhaps consider the simplest package of features for the lowest possible price. If you don’t process a lot of checks, maybe a low per-check fee is better. And if you are starting to hire employees and grow your staff, a lower per-person fee might be a better value for your business as you grow.

If you want advice on any bookkeeping and accounting issues you encounter, reach out to Bizee. We can handle the busy work for you and we even provide a free tax consultation.