Another big advantage of a 401K vs. an IRA is asset protection. Depending on what state you live in, 401k funds are usually shielded from court settlements whereas IRA funds may be at risk. I'm not a lawyer so I can't tell you more, yet the protection comes from ERISA, a federal law governing retirement. I actually learned about this from a representative at Fidelity Investments. I was so impressed with the free (and accurate information as I later learned from my accountant and my lawyer)that I chose them as my investment vehicle.
In my 401K plan I had my accountant do the initial documents and I am the trustee. The initial documents will cost a few hundred dollars and there are several accountants and pension specialists who can help you with it. (I STRONGLY RECOMMEND YOU USE ONE WHO IS LOCAL AND REPUTABLE although you can use someone from another state as 401k is Federal tax only).
You can then set up an account with any fund company (i.e. Fidelity, Vanguard, or similar) to invest the funds. Usually, if you are a small business you will set up your 401K to where everyone participates and you (the employer) contributes 3% of gross salary each year to the account. Your employees may contribute up to 100% of their salary to a max of $15,500 a year (as can you). If you use a fund company like Fidelity or Vanguard, your employees and you can invest in virtually any fund or stock on the market. You can each guide your own investments, so you don't have to worry about choosing a few funds to invest in or be limited in your options. If you set up a profit sharing plan (which I recommend), you will be able to contribute above the $15,500 (if you are so blessed to be able to do this), yet you will have to share some of that with your employees. You set up eligibility rules so you are not paying employees who are not going to be long term (in my plan you must have one year of employment and then can enter the plan on either July 1 or Jan 1.)
I do use Paychex for my payroll and love their service, yet you might be able to save the monthly administration fee as there is really not that much to administer. The main issue I have is writing out the checks to Fidelity on a regular basis (I do it monthly). If you use Paychex or another payroll service they can do the contributions for you for $3.50 per employee, yet this will add up quickly through the year (another few hundred dollars). Good luck. Hope this helped.
