How to Set Up Payroll for Beginners 2026 - Full LLC/S Corp Tutorial! (Step-by-Step)

A very common question I get is, "Charlie, how do I run payroll for my business and pay myself and my employees and contractors? " So, I currently run payroll for over 80 people for my businesses right now. I use tons of really great tools, tons of really bad tools. And in this video, I'll go through exactly how to run payroll step by step the best way possible. So, in the first part, we'll cover why you should actually run payroll. In the second part, I'll show you how to set up W2 payroll for yourself and your team. And then in the third part, I'll show you how to pay contractors on your team. So this would be 1099 contractors in the US for overseas hires. I'll also go through my tips and tricks after running payroll for so many years. So yeah, hopefully you guys find this video helpful. So first of all, why do you need to run payroll? So anyone with a business, you may have a team and you want to pay them, right? The way that you're going to actually do this is through payroll. And there are some really great tools out there to do this for you. Now for S corporation and Ccorporation business owners, it is actually required to pay yourself a salary through payroll, especially once you are starting to reach profitability. So let's first talk about S corp owners. Running payroll is going to allow you to actually pay yourself a reasonable salary and then take remaining profits as distributions. There are some tax advantages to this. I just recommend talking to your CP about it. Yeah, essentially the main thing is you're avoiding self-employment tax on the distribution portion. And it's also necessary to do this once you reach profitability. And it's the exact same if you are an LLC taxed as an escort. So right away, if you're an escort or you're an LLC taxed as an escort, which probably most of you guys are, then yes, you are going to need to run payroll. Now, let's talk about for Ccorporations. For Ccorps, your salary is deductible to the company. This creates earned income for benefits and it also enables retirement contributions. So, some of you watching this might have Ccorporations and yeah, you'll probably need payroll at some point. Now, for single member LLC's and sole proprietorships, you may not need to pay yourself via salary through payroll, and you might not need payroll software to actually pay yourself because all income is actually just considered self-employment income. So, you can just get paid with a transfer, and then you pay taxes on that personally. So, I'm going to make a whole another video on this exact topic. But, if you are a single member LLC or sole proprietorship, you may still want to pay other people, and that is achieved through payroll. So, now let's talk about how to actually run W2 Payroll no matter what type of business you have. Now, like I mentioned, I've used tons of different payroll softwares. My current favorite is going to be Gusto without a doubt. But honestly, the differences like they're not that different. Yeah, for me, I just think Gusto has a really solid dashboard and payment flow. It's really easy to set up and it's just easier for me to actually just run payroll. There are other payroll softwares out there, too, that I use, but they're a bit clunkier. So yeah, for most of you guys watching this video, if you haven't set up payroll yet, I just recommend going with Gusto. I'll actually have a link down below. If you use that link, you'll get the best possible pricing on Gusto, as well as any current discounts that they have. And yeah, I just encourage you guys if you haven't set up payroll yet, but you need to, you can just sort of follow along with this video. I'll take you guys through the steps and yeah, by the end of the video, you'll know exactly how to set up payroll and you'll have done it, which is pretty awesome. Pricing is all really similar. They have a few different plans, the simple, plus, and premium plan. For most of you guys watching this video, I think the simple plan is going to be good enough. You'll select this after you actually create your account. And yeah, essentially it's going to be a fixed monthly price plus a small amount per W2 employee that you have per month. I know, I know it's annoying to pay for payroll software. But trust me, it is 1,000% worth it. They handle all the compliance, all the taxes, all the complicated stuff. You don't want to be running payroll yourself because yeah, you're going to mess up somewhere and I just really recommend using something like Gusto. So if you guys use the link down below, it's going to take you to this page and yeah, it's free to set up an account. So, I just recommend doing that. And after you set up your account, you're going to get an email to verify it. So, just enter in all of your information. It's very easy. Click create an account. You'll get an email to verify your account. So, go to your email, click on that link there, and then it's going to take you through your company profile. So, you'll select who your company is planning to pay on Gusto. So, likely it's going to be yourself, right, as a W2 employee, and it might also be employees in the US. So, select that if that's applicable. And then anything else you can select two as well, but we'll just leave those blank for now. It's going to ask you how your company currently runs payroll. So, I'll just say that we're new to running payroll. If you're switching from a different provider, just select accordingly. It's going to ask if your company is registered as an employer with the IRS. So, if you have an EIN already, then just click on yes. If you don't have an EIN yet, you're going to want to create an EIN with the IRS, which is very, very easy. Takes about 5 minutes, but you can select no for now and come back and set it up later. Just know that you're going to need your EIN before you actually pay your employees. It's going to ask if you have a company bank account. Just select accordingly. Have you already hired your first team member? Answer that accordingly. I'll select yes. How many team members in the US are you planning to pay? Put a number right here. You'll select which states your employees work in. So for me, I work in California and my employees are also in California. So I'll just select that. But of course, select whatever fits your business. It's going to ask a few other questions. Just feel free to answer them. It is important that you guys answer this truthfully. So, make sure to select the correct industry and whatever matches the best. It'll ask if anyone in your company needs to track

hours worked or create hourly schedules. Just select accordingly. As for health benefits to your employees, just select whatever fits. It doesn't really matter too much what you select here. And same thing with the 401k question. If you have workers comp insurance already, select yes. But if don't, it's okay. Just click no. Then it's going to ask you for your desired first payday with Gusto. You don't need to be perfect on this date. just put an estimated date if you don't know cuz yeah, we can absolutely change this later. So, it's going to recommend which plan is going to work best. I recommend clicking on edit. You likely won't need the plus plan. So, I don't know what it's recommending for you guys based on your answers, but for me, I think the solo or simple plan is going to be perfect. If you guys want any add-ons, you guys can select those, but for me, I don't need next day direct deposit. And for any of that stuff, you can deselect them if you don't want to learn more from their partners. Totally up to you. And then you're going to click on start with this package. So now you're going to enter in your payroll details. So it's going to ask you if you want to add another admin. It's going to have you enter in your addresses, your federal tax info, your bank account, direct deposit speed, as well as the pay schedule. So this is all pretty self-explanatory. It should take you maybe 10 minutes to go through this. There is no payroll software out there that you know you can sign up for in under 5 minutes. Does require a certain amount of info, so just be patient with it and yeah, just fill everything out. It's all pretty straightforward. They're going to guide you through it. And that's one thing I really like about Gusto. Their onboarding process is just really good compared to some of the other platforms out there. And so that's why I recommend it for most newer business owners. Next is going to be your tax setup and then any authorizations. And then you're going to add people that you're actually paying. So that's going to be your W2 employees as well as probably for yourself. Next, you're going to set your pay structure. So you're basically going to say the pay frequency. So this can be monthly, weekly, or semionthly. It'll also ask you if it's salary versus hourly. if there are any overtime rules, any PTO policies, and any benefits. So, you just set this up one time, but you can change it later on if anything changes. And now, for people that were looking to pay themselves a salary, you're of course going to add yourself. You're going to set your salary amount. It's going to ask you about bonuses and also retirement contributions. And then they're basically going to take all this and invite your team members with the info that you gave them. So, it's very similar onboarding for all the different payroll softwares out there. I'll put some other of my recommended ones down below in the description. We'll have a full guide for you guys on payroll, but for most of you guys, like I said, I think Gusto is the best choice. So, next, you're going to run your first payroll. So, things that you're going to need to do specifically is first review your payroll preview. Make sure that the amounts are correct, and then you're going to click submit. And then, basically, what Gusto does is they're going to pay you or pay the employees, whoever you're paying. They're going to pay the IRS and any state taxes that are due. They're going to file any payroll forms, and they're going to log everything. And the whole thing with using a payroll software is that it's going to do this all compliantly. It gets pretty complicated to be honest and that's why I do not recommend trying to do this yourself. So after this payroll can definitely be automated, right? So you can set it to have a certain pay schedule that you can always edit at any time or you can actually run payroll manually each period if you want. In terms of the ongoing maintenance, there's really not that much you need to do. All the hard work is done at the start when you do your onboarding and set up your first payroll. But basically, it depends on what settings you have. But essentially, for each payroll period, you're going to want to approve payroll or set up auto run. You can add any bonuses or adjustments if anything is needed. And then that's pretty much it, right? They're going to handle everything else. And then every quarter and also annually, Gusto is going to handle the filings. It's going to actually issue W2s or 1099s to the people that you pay, and it's going to generate reports that you can give to your CPA. These are going to be really important for you to actually file your taxes correctly. So, make sure you generate those reports. Now, there are definitely a bunch of mistakes that a lot of people make when it comes to running payroll. The first is if you're a sole proprietor trying to pay yourself through payroll. So, that's not allowed. All you have to do is do a transfer from the bank account to your own personal one or you might be just getting paid directly to your personal bank account. But the thing is, you don't need a payroll software if you're a sole proprietorship. Same thing if you are a single member LLC that's just trying to pay yourself. Another mistake people make is they select the wrong entity at signup. So during onboarding, you're going to want to select the correct entity type because that's going to affect all the payroll and tax filings. Another mistake is people will use their personal bank account. You want to definitely use a business bank account to really separate your personal and your business. If you co-mingle your funds between personal and business, this is going to mess with your liability protection. And trust me, you guys don't want to do that. A lot of people also don't coordinate with their CPA. As a business owner, you probably have a CPA that you work closely with. Give them a heads up that you are going to be running payroll. They can give their input on what a reasonable salary is for you based on your business financials. But the whole point here is you do want to coordinate with your CPA. Then sort of piggybacking off that last point. A lot of people will set their salary way too low. And if you do this, there is a higher chance for audit. So definitely just come up with a reasonable salary with your CPA. This will really depend on how much net profit there is in your business. Now

let's talk about how to pay contractors as well as overseas staff. So, basically the first thing I'll say is that there are tons of different ways. So, you can use Gusto or other payroll software to do this as well. For me, I like to use Deal for my international hires and I have a pretty sizable international team. So, Deal has really been a lifesaver there. I'll have a link down below to Deal. This is my preferred payroll software for international hires. If you click on that link, you'll be able to check out the different pricing. So, don't be scared of the deal. E O R. Most people that hire overseas do not need this one. It's very likely that you're going to be paying contractors overseas instead. So Deal's pricing is $49 per contractor per month. This is what I use for my business. And yeah, the reason why I use Deal is because they have a bunch of builtin contracts that you can use for your international hires. So these contracts are going to change depending on what country you're hiring in. For example, my contracts in, let's say, Indonesia are going to be different than the contracts in Argentina. Now I will say for a lot of businesses it's going to be more expensive to use deal than something like PayPal but in my opinion it can be quite worth it depending on where your business is at. There's also going to be wise and paneer that you guys can use too. These are solid too but they do offer a lot less support and compliance. So if you want that like full compliance everything in one sort of thing then deal is probably going to be your best choice but just for paying wise and payer are also solid. You can also use PayPal but I will say they have pretty high fees. The exchange rates are also really bad. So, I don't like using PayPal because, you know, the higher they also don't get as much in the exchange rate. But, I will use PayPal for paying some US-based 1099 contractors. And you can actually avoid a fee if you use friends and family. And on the topic of overseas talent, if you guys have a business and you aren't hiring overseas yet, I think you're making a huge mistake. I actually have my own overseas recruiting company called Paired. We find phenomenal talent in places like Indonesia, Latin America, South Africa. that can save you up to 80 90% on your payroll costs. Yeah, most of my team they are overseas. I really love hiring across the world and there's just really amazing phenomenal talent everywhere. You just need to recruit and identify talent correctly and that's what this agency does. So yeah, if you're interested, you guys can book a call, talk to my team, and we can see how we can probably save your company hundreds of thousands of dollars in payroll each month. So yeah, that's my whole guide on how to run payroll for your business. It is a pretty complex topic. I know we covered a lot of different stuff, but feel free to just watch this video over again. I encourage you guys to just set up payroll as you watch the video. Again, I'll have my link to Gusto for the best possible pricing on their payroll software. And yeah, hopefully you guys have a better understanding of payroll, why you need to run it, and how to actually do it effectively and affordably. And every single resource that we talked about in this video is going to be down below. So yeah, thank you guys. I know you guys spent a good amount of time with me in this video. If you got any value from it, make sure to like or comment and also subscribe if you want to see more content just like this. I do a ton of videos about personal finance, business, and a whole bunch of educational tutorials. My whole goal is to help you guys live a financially successful life. Thank you so much again, and I'll see you in the next video. Peace.