Have you considered hiring your child to work in your business? There are good reasons why many business owners decide to keep it in the family. Working with your children can benefit both your business and your relationship with them. Here’s an overview of some of the biggest perks:
One major benefit is the tax savings you can receive. You’re able to deduct the wages paid to your child as a business expense. Additionally, you may not have to pay certain payroll taxes if they are under 18. Just be sure to pay them a fair wage for the work they do.
One term for this is income shifting. Income shifting is a tax planning strategy used by some business owners to legally reduce their overall tax burden by spreading income among family members who may be in lower tax brackets.
Lower Labor Costs
Depending on your child’s age, skills, and the required tasks, you may be able to pay them less per hour than an adult employee. While you still need to follow labor laws for minor employees, this can help reduce personnel costs.
Another advantage is the ability to gradually transfer ownership as your child gets older. Working in the family business allows them to learn the ins and outs at a young age. Over time, they can take on more responsibility so that one day they can take over running operations.
Loyalty to the Business
Children who grow up learning about the family business often feel invested in its success. Since it’s so close to home, they tend to have extra motivation and loyalty as employees. Utilize their dedication and enthusiasm!
Here are some real-world examples of business owners who involve their children in a family business:
- The Family Restaurant: A 15-year-old helps hostess by seating customers, answering phones, and even assisting servers during busy times. This allows her to learn customer service skills and responsibilities.
- Accounting Firm: During his summer breaks, a 17-year-old son interns doing basic bookkeeping and tax preparation support. He gains insight into accounting careers and may join the firm full-time after finishing college.
- Local Retail Store: A high school junior manages the store’s social media pages, creating Facebook posts and online promotions. This allows the business to reach younger audiences while she learns real-world marketing tactics.
- Law Practice: An 18-year-old daughter shadows attorneys, observes proceedings, and assists with research and client documents. Through exposure to daily law operations, she can decide if joining the family firm as a lawyer appeals to her.
- Construction Company: The kids grew up spending summers assisting with equipment, job sites, and planning projects with the foremen. Now, as adults, they co-manage operations with their aging father before fully taking over the business one day.
Overall, hiring your children can be a rewarding experience with potential tax benefits for both you and them. However, it’s essential to approach it carefully, thoughtfully, and ethically to avoid any negative consequences.
As with any tax strategy, there are many variables to consider. Remember, if it seems like it’s too good to be true, it probably is! Meet with your tax advisor if you have dependent children that you are considering employing in your business this year to review the financial and tax benefits for both your business and your children.