Single-member LLC in Iowa, no employees at all. I just pay myself owner draws. Someone told me I still need payroll software to stay compliant. That sounds off to me. Do I actually need it?
Payroll
My Iowa LLC has no employees, so do I need payroll software?
No employees, no payroll. Owner draws aren't wages. The person who told you that is probably thinking of an S-corp.
You don't need payroll software, but you do need to keep clean records of what you take out. Draws, not payroll.
Depends. Are you taxed as a sole prop or have you elected S-corp status? That That is the only thing that would change the answer here.
Default sole prop, never filed an S-corp election. So no payroll then.
Correct. I ran a single member LLC for six years with zero payroll software. Just a separate bank account and a spreadsheet.
Then you are fine. S-corp is where the reasonable salary and payroll requirement kicks in. Until then, draws.
What if you hire a 1099 contractor? Does that count as payroll? I have been confused about tgis for a while.
1099 is not payroll. Different thing entirely. But make sure they are actually a contractor and not an employee in disguise.
Right. If you control their hours and how they work, the state may treat them as an employee, and then you would have payroll obligations.
Who told you that? A software salesperson?
A guy at a networking thing. He was pretty insistent. Sounds like he was just wrong.
Networking guy giving compliance Advice. Classic.
One caveat. If you ever elect S-corp, you will need to run payroll for yourself. So keep that in mind if you grow.
What software would you even use at that point? Asking for future reference.