Updated: Nov 1, 2017
One of the major perks of being both a parent and a business owner is that you can hire your kids to work for you. Not only will they get a valuable opportunity to earn their own money and save for the future, but you’ll also get some much-needed assistance in the workplace. That’s a win-win.
But the benefits don’t stop there — below are two more reasons you should consider hiring your kids to help out with your business.
Working gives kids the opportunity to learn and grow in an environment outside of school. On top of developing the specific skills necessary to perform their job duties, be it coding, filing, or customer service, your kids will also learn valuable life skills, such as how to manage their time effectively, ask questions, follow instructions, take initiative, behave professionally, and work as a team.
Assuming your child isn’t receiving income from another job, she may be able to earn up to roughly $12,200 a year (for tax year 2019) without paying federal income taxes. That’s a sizable chunk of money to set aside for college tuition, travel, summer camp, or a car. As a business owner, you may also be eligible to take a tax deduction on your child’s wages, as long as she is doing work that qualifies as a legitimate business expense.
Plus, if you’re a sole proprietor, partnership or LLC taxed as a partnership and owned only by your child’s parents and your child is under 18, you may not have to pay social security or Medicare taxes for your child’s wages. If you’re a corporation, you’ll likely have to pay payroll taxes, but you may be able to write off your child’s earnings. Keep in mind that tax rules can vary by state, so we recommend consulting with a tax advisor before proceeding.*
It’s crucial that you comply with all legal requirements when hiring your kids. You need to abide by child labor laws that, among other requirements, dictate how many hours children are allowed to work, when they can work and what types of jobs they’re allowed to do, in addition to filling out employee contracts and recommended IRS forms.
It’s also important to pay your kids reasonable wages; as a rule, their salary should be equal to what you’d pay another person in the same role. To create a documented account of your child’s earnings, it’s helpful to keep payroll records and pay your child via check or direct deposit, as opposed to cash in hand.
Your kids don’t need to have three years of experience and a killer resume to work for you, but they do need to be capable of performing the basic functions of the job. That means taking into account their age, skillset, confidence level, and learning abilities when assigning them a role. A 15-year-old may not be ready to field important sales calls, for example, but she could file folders, organize spreadsheets, and update the office calendar.
By law, you need to hire your child for a legitimate, helpful job within the business. That doesn’t mean you can’t create an entirely new position, but the job has to be a role you’d pay someone else to fill if your child weren’t available.
For example, if you’ve been wanting to hire a social media manager to build out your boutique flower shop’s online presence, and your 17-year-old daughter knows her way around Twitter and Instagram, it’s fine to hire her for the position. What’s not appropriate is paying her to be the official cleaner of fallen flower petals if that job isn’t one you’d pay someone else to do.
Before your child starts working, it’s helpful to set expectations together: discuss your child’s schedule, responsibilities, and projects, plus details like whom to report to and what to wear to work. From there, create a timesheet and teach her how to log the hours and days she works. Having a thorough account of her work will help with payroll and tax purposes.
If you want to go the extra mile, consider encouraging her to record the specific work duties she performed as well; a record of her tasks and progress will allow you to clearly see the areas where she contributed the most, and will give you a better idea of how to utilize her skills and passions going forward.