Before running your first payroll, you need several foundational pieces in place. Getting this right from the start prevents penalties, messy books, and scrambling to fix mistakes later.

Start with a federal Employer Identification Number if you don’t already have one. You can apply online at IRS.gov and receive it immediately. This number goes on every payroll tax filing and every W-2 you issue. Without it, you can’t legally process payroll.

In Texas, register with the Texas Workforce Commission for unemployment insurance. Texas doesn’t have state income tax, so there’s no state withholding account to worry about. But you still owe unemployment tax to the state, and TWC registration needs to happen before your first payday.

Worker classification matters before you hire anyone. Decide whether your worker is truly an employee or an independent contractor. The IRS looks at how much control you have over the work, whether you provide tools, and whether the relationship is ongoing. Most people who work regular hours under your direction are employees. Getting this wrong leads to back taxes, penalties, and interest that can exceed the original amount owed.

Pick a pay schedule that works for your cash flow. Weekly, biweekly, semi-monthly, and monthly are all options. Texas requires at least two pay periods per month for most employees. Biweekly is common because it’s predictable and manageable. Once you set a schedule, stick with it.

Choose a payroll system before your first pay run. Options like Gusto, QuickBooks Payroll, or ADP handle tax calculations, generate pay stubs, file payroll tax returns, and make tax payments on your behalf. Doing this manually as a first-time employer almost guarantees mistakes. Payroll system setup and training can help you get configured correctly if the options feel overwhelming.

Collect a W-4 from your employee before their first paycheck. This tells you how much federal income tax to withhold. Enter their information into your payroll system along with the W-4 details. The system handles the math automatically. You’re also responsible for employer-side taxes including Social Security, Medicare, and federal unemployment.

If you’re offering health insurance or retirement contributions, set these up in your payroll system before running payroll. Each deduction needs correct pre-tax or post-tax treatment because it affects both take-home pay and your tax obligations. Even if you’re not offering benefits initially, understand how to add them later.

Finally, connect your payroll categories to the right accounts in your bookkeeping software. Wages should hit a wages expense account. Employer payroll taxes go to a separate account. Benefits expenses get their own line. Getting this mapping right from the beginning means your financial statements accurately reflect labor costs and your year-end books are ready for business tax preparation without extra cleanup. Skipping this step creates reconciliation headaches when tax season arrives and your books don’t match your payroll reports.