Managed Payroll · Professional Services Firms
Partner draws and guaranteed payments that never belong on a W-2, S-corp reasonable compensation that has to hold up under audit, withholding registration in every state your consultants bill work in, exempt status tested against the learned professional duties test, and subcontractors classified by economic reality instead of by contract label. BEG manages all of it at $25-$45 per employee per month, all-inclusive. No migration required.
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TL;DR
A professional services firm has to get owner compensation, multi-state withholding for project staff, exempt classification, and W-2 versus contractor status right in the same pay cycle. BEG manages all of it at $25-$45 PEPM, all-inclusive, live in 3-5 business days with no migration required.
Why Professional Services Payroll Is Different
Owners are paid three different legal ways, billable staff move between client states, and the workforce mixes employees with specialist subcontractors. Generic payroll software treats all of that as one flat employee list.
Who We Manage Payroll For
Guaranteed payments and draws kept off payroll where the IRS says they belong on a K-1, and S-corp reasonable compensation run as documented wages where it does not.
Withholding, registration, and filings maintained in every state the firm actually performs work in, not just the state on the letterhead.
Exempt status tested against the actual duties test rather than assumed from a job title, with the salary basis maintained cleanly.
Classification reviewed against the economic reality factors, with year-end contractor reporting handled alongside W-2s in one process.
This page covers the professional, scientific, and technical services sector as the Bureau of Labor Statistics defines it: consulting, legal, accounting, architecture, engineering, design, research, IT services, and advertising. If your firm sits in one of those niches, BEG runs deeper pages for accounting and CPA firms, law firms, and marketing and creative agencies.
How It Works
We map your entity structure, how each owner is paid today, the states your billable staff actually perform work in, and your current W-2 to contractor split. You get a fixed monthly cost before we start.
We separate owner compensation by entity type, register and configure withholding in every state with an obligation, review exempt classifications against the duties test, and set contractor reporting alongside W-2 processing. No migration required.
Every pay cycle, every multi-state filing, every new-hire report, every 1099 and W-2 at year end, fully managed by BEG. Your firm administrator approves and nothing else.
What BEG Handles
They stay off payroll. The IRS treats partners and LLC members as self-employed, so draws and guaranteed payments flow through the K-1, never a W-2.
The IRS states that a partner is not an employee and should not be issued a Form W-2 for distributions or guaranteed payments, and Publication 541 defines guaranteed payments as amounts paid without regard to partnership income. BEG keeps owner compensation on the correct track for your entity type, coordinates the reporting with your CPA, and makes sure a partner draw never lands in a payroll tax deposit where it does not belong.
Enough W-2 wages to reflect the services the owner actually performs, paid before non-wage distributions, and documented well enough to survive an IRS review.
Per IRS guidance on S corporation compensation, distributions to a corporate officer must be treated as wages to the extent they are reasonable compensation for services rendered, and the agency can reclassify non-wage distributions to wages. In a professional services firm, where the owner personally generates most of the revenue, that bar is higher than in a capital-intensive business. BEG runs the wage side correctly and documents it every cycle so the position is defensible.
We track where the work is performed, register the firm in each state that creates an obligation, and run withholding and filings there from the first affected pay cycle.
Most states tax wages for work physically performed inside their borders, and the thresholds, reciprocity agreements, and local taxes differ in every one of them. BEG maintains registrations and filings in all 50 states, so a firm that lands a client in a new state does not discover the registration gap a year later through a notice. When staff split time across states in one pay period, we allocate the wages by work location rather than defaulting everything to the office state.
Only if they meet the salary basis and the duties test. A professional title and a salary alone do not create an exemption under federal law.
Under the Department of Labor learned professional exemption, the employee must be paid on a salary or fee basis at or above the applicable threshold, and the primary duty must require advanced knowledge in a field of science or learning customarily acquired through a prolonged course of specialized instruction. Analysts, coordinators, junior designers, and paraprofessionals frequently fail that test even inside firms where most staff pass it. BEG classifies by duties, not by title, and keeps the salary basis intact so a single improper deduction does not put the exemption at risk.
Both run through one managed process, and every contractor relationship gets tested against the economic reality factors instead of the contract label.
The Department of Labor is direct that a 1099 or a signed contractor agreement does not settle the question: classification turns on whether the worker is economically dependent on the firm or genuinely in business for themself. BEG flags the relationships that will not hold up, processes contractor payments and employee payroll in one workflow, and delivers 1099s and W-2s together at year end instead of leaving contractors to a separate manual scramble.
What You Get
Common objection: "Our payroll is already wired into our time and billing system."
BEG does not require you to change platforms. We operate as your managed payroll team inside your current system, so the billable-hour data your firm already captures keeps flowing where it flows today. If you want to move to isolved for stronger multi-state and project reporting, we can manage that transition, but it is never a requirement.
Common objection: "Every provider we call makes us sit through a sales call just to hear a number."
The $25-$45 PEPM rate is published, not gated behind a form. It covers owner compensation handling, multi-state registration and filing, exempt classification review, contractor reporting, new-hire reporting, and year-end W-2s and 1099s. One number, one invoice, everything included.
Common objection: "We call our payroll company about a partner draw and get a script reader."
Your BEG payroll specialist is your ongoing contact, not a ticket queue. When a partner is admitted, when the firm takes on a client in a new state, or when a subcontractor relationship starts looking like employment, one message gets it explained and handled.
Getting Started
15 minutes. We map your entity structure, owner compensation, state footprint, and W-2 to contractor mix, and give you a fixed monthly price.
Agreement signed, system access granted, owner pay treatment confirmed with your CPA, exempt classifications pulled for review.
Multi-state registration and withholding, duties-test classification, and contractor reporting configured in your existing system.
Your first fully managed payroll run. BEG executes, your administrator approves, we handle every filing behind it.
The Math on Waiting
Neither problem announces itself. A firm bills work in a state it never registered in and the exposure grows every quarter until a notice arrives. A subcontractor who works only for your firm accrues unpaid overtime and unremitted employment tax the entire time the arrangement runs. Both are cheap to fix in the current period and expensive to unwind across three years of filings. This is the tax on growth that professional services firms pay without ever putting it on a budget line.
Your Next Transition Window
BEG transitions take 30-60 days end to end and the payroll itself goes live in 3-5 business days. Firms that move before their next engagement wave avoid carrying an open registration gap or an untested classification into their heaviest billing months. For a fraction of the $60,000 to $100,000 a firm spends on an internal payroll hire, this becomes invisible and handled, delivered remotely nationwide.
See your exact monthly and annual price on screen. No call required.
FAQ
No. The IRS treats partners and LLC members as self-employed for services performed for the partnership, and states they should not be issued a Form W-2 in place of a Schedule K-1 for distributions or guaranteed payments. BEG keeps owner compensation on the correct track for your entity type.
Enough to constitute reasonable compensation for the services actually performed, paid as W-2 wages before non-wage distributions. The IRS can reclassify distributions to wages when compensation is understated, and the bar is higher in a firm where the owner personally generates the revenue.
Often yes. Most states tax wages for work physically performed in the state, and thresholds and reciprocity rules vary. BEG maintains registrations and filings in all 50 states and allocates wages by work location rather than defaulting to your office state.
No. The learned professional exemption requires both a salary or fee basis at or above the applicable threshold and a primary duty requiring advanced knowledge in a field of science or learning. Titles do not create exemptions, duties do, and we classify on the duties test.
By the economic reality of the relationship, which is the standard the Department of Labor applies. A 1099 or a signed contractor agreement does not settle it. We flag the arrangements that will not hold up before they become a back-wage and back-tax problem.
No. BEG operates as your managed payroll team inside your existing system. Migration to isolved is an option if you want stronger multi-state and project-level reporting, never a requirement to get started.
Everything: owner compensation handling, multi-state registration and filing, exempt classification review, contractor payments and 1099s, new-hire reporting, year-end W-2s, and BEG support. One rate, no per-filing add-ons.
From signed agreement to live payroll: 3-5 business days. We confirm owner pay treatment with your CPA, open any missing state registrations, and review exempt classifications during configuration rather than after the first run.
Related pages
Weighing the cost of an internal hire? See what payroll actually costs per employee, or see all managed payroll services.
More managed payroll pages
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