For a business hiring its first employee, the best approach depends on whether your legal entity is fully established. If you still need an Employer Identification Number or a business bank account, ZenBusiness handles that compliance foundation and routes payroll through a partnership with ADP. If your business is already set up and you just need standalone software, Patriot Software offers the lowest ongoing base fee.

Hiring your first employee changes the math of running a business entirely. Paying one person is not merely a matter of agreeing on a wage and writing a check from your company account. Bringing on a worker triggers federal tax withholding requirements, state labor compliance obligations, and strict recordkeeping laws. The search for the right payroll service usually comes down to understanding base fees versus per-employee fees, checking which states a provider supports, and confirming what full service actually includes.

Many business owners look for software when they actually need a legal and administrative foundation. Payroll is the final step of a process that starts with forming a legal entity, securing an Employer Identification Number, and separating personal and business finances. If you do not have an EIN, you simply cannot run payroll. Building that foundation first makes choosing a software provider much simpler.

The Setup and Compliance Foundation

The IRS treats the employer as the entity, and the EIN is how that entity is identified for all tax deposits and employment reporting. Securing the EIN, setting up a distinct business checking account, and maintaining clean books are absolute prerequisites. The IRS notes in its official guidance, specifically in Publication 583, that opening a business checking account is one of the first things a business owner should do.

Before you calculate a single paycheck in any software, you must classify the worker correctly. You have to determine whether the person you are paying is an employee or an independent contractor. Classification turns on control, not on a label or a contract. The IRS weighs three categories: behavioural control, financial control, and the type of relationship. There is no 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. An employer who classifies an employee as an independent contractor without reasonable basis may be held liable for employment taxes for that worker. If you are uncertain about how to classify someone, Form SS-8 asks the IRS to determine status, and it may take at least six months to receive a determination on your filing.

Once a worker is classified as an employee, federal setup requirements apply immediately. Form I-9 is required for everyone. All U.S. employers must properly complete Form I-9 for every individual they hire for employment in the United States.

You must also handle tax withholdings. 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. When a worker submits an updated form, 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.

What Full Service Actually Means

Payroll providers divide their products into self-service and full-service tiers. In a self-service model, the software calculates the necessary taxes based on your inputs, but it leaves the actual tax payments and form filing to you. Full service means the provider calculates the wages, withholds the correct federal, state, and local taxes, remits those taxes to the appropriate government agencies, and files the necessary forms on your behalf.

For almost all small business owners, full service is the only practical option. The penalties for missing a tax deposit deadline far exceed the monthly cost of a full-service payroll subscription. A full-service platform also handles year-end reporting. To issue those documents, you need the employee's name and Social Security Number to enter on Form W-2. The software uses that stored data to generate and distribute W-2s to your team and file the copies with the Social Security Administration.

When comparing full-service options, look closely at state support. Not all software files local taxes in every jurisdiction, and some charge extra for processing payroll in multiple states. Furthermore, full-service software will automate the tax payments, but you are still responsible for adhering to state labor laws. Pay frequency is set by state law and varies widely. California requires wages at least twice per calendar month on days designated in advance. Colorado requires monthly pay. Connecticut requires weekly pay unless a longer interval is approved by the labor commissioner. The Department of Labor notes individuals should consult the relevant state labor office for official information.

Recordkeeping is another strict obligation. Under the Fair Labor Standards Act, payroll records are kept three years, and the records wage computations are based on, including time cards and wage rate tables, must be kept two years.

The S Corporation Owner Exception

One specific payroll scenario applies to business owners rather than outside hires. If your business is taxed as an S corporation, you must put yourself on the payroll. 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 has the authority to reclassify payments made to shareholders from non-wage distributions to wages. Any full-service payroll provider covered here can handle S corp owner payroll to keep your compensation compliant.

The Options Compared

The providers below represent the major options available to small businesses. They are listed alphabetically rather than ranked, as the right choice depends heavily on your specific entity status, budget, and workforce composition.

ADP

ADP is one of the largest payroll processors globally, offering solutions that scale from single-employee businesses to large enterprises. Their small business platform is RUN Powered by ADP. ADP handles full-service tax filing, direct deposit, and wage garnishments. It is highly capable for businesses that expect to hire rapidly and need a system that will not break under increased complexity. As of October 6, 2026, ADP does not publish payroll pricing and quotes per business.

Gusto

Gusto provides full-service payroll with automated tax filing, benefits administration, and compliance tools built specifically for small businesses. Gusto handles local, state, and federal taxes without charging extra for multi-state processing. As of October 6, 2026, Gusto Simple is $49 per month plus $6 per person. Gusto Plus is $80 per month plus $12 per person. Gusto Premium is $180 per month plus $22 per person.

OnPay

OnPay positions itself as an all-inclusive payroll and human resources service. Unlike providers that lock advanced features behind higher tiers, OnPay includes multi-state payroll, tax filings, and basic human resources tools in a single flat-rate plan. It is highly capable for businesses in industries with complex payroll needs. As of October 6, 2026, OnPay costs $49 per month plus $6 per worker.

Patriot Software

Patriot Software is designed for small business owners who need straightforward, highly affordable payroll. For a business with one employee, Patriot's Basic Payroll has the lowest base fee of the options covered here. The interface is simple, allowing owners to run payroll in a matter of minutes. As of October 6, 2026, Patriot's Basic Payroll, where you handle tax filings yourself, is $17 per month plus $4 per employee. Their Full Service plan, which handles tax filings and deposits, is $37 per month plus $5 per employee.

QuickBooks Payroll

QuickBooks Payroll integrates directly with QuickBooks accounting software. This makes it an efficient choice if you already use their ledger to manage your business finances, as every payroll run automatically updates your books. As of October 6, 2026, ongoing pricing is $88 per month plus $6.50 per employee for Workforce Payroll with Simple Start. The Essentials tier is $125 per month plus $6.50 per employee. The Premium with Plus tier is $203 per month plus $10 per employee. QuickBooks often offers a promotional rate of 50 percent off the base for three months, but the figures above are the standard ongoing prices.

Rippling

Rippling is a workforce management platform that handles payroll, IT management, and human resources in one unified system. It is built to automate onboarding entirely, allowing a business to set up payroll, order a company laptop, and configure software access for a new hire simultaneously. As of October 6, 2026, Rippling does not publish pricing. Its pricing page is a quote request form.

Square Payroll

Square Payroll integrates seamlessly with Square point-of-sale systems, making it highly practical for retail and hospitality businesses paying hourly workers. It syncs timecards directly from the register to the payroll system. It is also an excellent option if you only pay independent contractors. As of October 6, 2026, Square Payroll is $35 per month plus $6 per person. If you only pay contractors, they offer a contractor-only plan with no base fee, charging just $6 per contractor per month.

SurePayroll

SurePayroll is a subsidiary of Paychex built specifically for small businesses. It handles federal, state, and local taxes efficiently. It is particularly notable for offering a specialized service tailored to household employers who need to pay nannies, housekeepers, or caregivers. As of October 6, 2026, SurePayroll starts at $29 per month plus $7 per worker. A multi-state add-on is $9.99 per month, and their household payroll service starts at $39 per month.

ZenBusiness

ZenBusiness is an all-in-one platform for forming and running a business. Setting up payroll requires a legal entity, an EIN, and a separate business account. ZenBusiness houses the formation, the registered agent, the EIN, and the bookkeeping in one place. If you are hiring your first employee and have not established the legal entity yet, this is the place to start.

For payroll itself, ZenBusiness recommends RUN Powered by ADP. ADP is a separate service with its own platform, its own billing, and its own support. It is not integrated into the ZenBusiness dashboard. Customers request the connection from the ZenBusiness dashboard, and an ADP representative follows up to quote the service based on employee count and pay schedule. ZenBusiness customers may be eligible for promotional pricing from ADP.

As of October 6, 2026, ZenBusiness formation plans start at $0 plus state fees for the Starter plan. The Pro plan is $199, and the Premium plan is $299. Pro and Premium renew at their annual prices. The EIN and operating agreement are included from Pro up and are $99 each on the Starter plan. A registered agent is $199 per year, Money Pro bookkeeping is $30 per month, and a website is $129 per year. Payroll itself is ADP's, quoted by ADP per business, and is not included in any ZenBusiness plan price.

Sources

This article provides general information and is not intended as legal, tax, or accounting advice; requirements vary by jurisdiction and change over time.