Tweet

Should You Hire Family Members?

Written by: Stephanie Horne

Article Overview: There are many business owners who hire their spouse, children or other family members to work in the business. Often, this works out very well. Other times, it causes problems. Let's look at the pros and cons.

Should You Hire Family Members?

Should you hire your children? Hiring your children for the summer or part-time usually has more tax advantages and fewer drawbacks than hiring other kinds of relatives. What makes it financially better is that if you're paying your child to do useful work, the business gets a tax deduction for the wages paid. Your child will probably pay little or no income tax, and the after-tax wages get to stay within the family. And, an added benefit if your child is under 18 and your business is unincorporated, neither the child nor the business need to pay federal payroll taxes. This exemption also applies to a partnership or LLC if the only partners are you and your spouce.

You will want to follow certain steps to make sure the wages are fully deductible. Your chid must be doing a real job that helps the business, and the wages must be reasonable for the work performed. Keep detailed records of hours worked and pay salary regularly, preferably on the same schedule as other employees. In other words, treat your child just like any regular employee.

Should you hire your spouce or relative? Hiring your spouce or other relatives generally doesn't bring the same payroll tax savings. However, it does bring up other pros and cons. The pros are that you have an employee whom you know very well, and who may be more motivated or more flexible than a non family member. And in many family-owned businesses, it is an efficient way to teach the next generation who may take over leadership of your business some day.

But that same familiarity can bring cons as well. Few families are without some internal or intergenerational conflict, and that can be disastrous and stressful if it spills over into the workplace. You must also consider the effect on other employees. Any sign of favoritism or unequal treatment can cause resentment and ruin the motivation of other employees.

The moral of the story? Be cautious. And think long and hard before you bring family members into the businesss. Talk to them and to your key employees beforehand, and make sure everyone understands and is comfortable with their future roles in the company.

For more information please visit my Bookkeeping Tips page - I look forward to hearing from you!

Related Articles
  Top 10 Ways Your Family Can Help Your Home Business Succeed
  Franchising for the Family
  Up In Smoke
  When and How to Get Feedback on Your Book-in-Progress
  Overcoming Obstacles in a Family Owned Business (Pros and Cons)

Article Tags: business owners, family members, pros and cons



Related Forum Posts
Re: Kevin. What happened to all others moderators? - Hi Carol, It's good to see you back. Family comes first. Take your time.
Re: Moderators on vacation - Well what happens if you own a store or bar/restaurant? You're up at the crack of dawn to do prep work, and the last one there late at night closing... open 7 days a week... what can such an entrepreneur do for time off? Hire a trusted manager?
Re: Twitter Members, Post Your Twitter ID Here - Hi Members, I have gone back over the list to check and update and as far as I know I am following everyone. If I have missed anyone please let me know, regards, Mal.
Re: POLL: What one thing... - Family and friends support is very important, especially at the beginning when it's hard. I didn't have any support, until my family saw the first check and since then I have all the support I need.
Re: New Google Tool Makes Websites Twice as Fast - Hi Members, Looks like a great tool if the speed button can be incorporated into our servers. I am also with Hostgator so maybe a few collective enquiries may get a positive response from them. regards, Mal.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

B2B PR – Planning for Success

Emotional Intelligence in Business

Sales Courage and Resilience

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.