How Can You Make Hiring Your Kids Work?
diamondcpas
May 15, 2018

Let’s say you operate as a sole proprietor or a partnership with husband/wife owners. Your children are old enough to be useful and you’re thinking of hiring them. Is hiring your kids a good idea?   There are pros and cons to consider.

Pros

One advantage is that you avoid the time and expense of the hiring process. Your children probably have a great sense of loyalty to the family business and will be motivated to maintain their family legacy. You can even groom them to take over the business someday.

When hiring your teens, they’ll be learning a good work ethic straight from you. You can teach them responsibility, hard work, and the importance of doing their best – lessons that will last a lifetime.

There are also definite tax benefits. You’ll be distributing some of your earnings and keeping it in the family, which lowers your company’s overall taxable income. If your child is under 18, you’re not required to withhold Social Security or Medicare taxes or federal unemployment taxes, and if your child makes less than $12,000, the standard deduction for 2018, he or she won’t pay federal taxes, either.  By providing your child with earned income, he or she may be able to contribute to an IRA (Roth or Traditional).

Cons

But there are two sides to every coin, and some of those pros can be cons. You may not have to do much interviewing, but your child might also not have all of the skills you really need. Without access to a talent pool, you’re stuck with what you’ve got.

And yes, you can pay your child and keep it in the family, but make sure you’re paying for real work done and paying an appropriate rate. If your 14-year-old is just filing and sweeping, don’t pay him or her what you would pay your machinist or accountant. And be sure to keep all the same documentation you would for any other employee, in case you’re ever audited.

The biggest problem, though, is that the casual connection may cause problems. Your child might take liberties, thinking he is entitled. Or she might bypass the normal chain of command and complain directly to you. Or worse, your adult child may really not do a good job, and if you fire him, there will be real family fallout.

How to Make It Work

You can, however, avoid these problems with a little forethought. Right from the beginning, establish clear guidelines and get them in writing. Make sure your children understand that they will be treated like any other employee. Family matters will not be discussed at work and they will not receive preferential treatment. Help them see that it’s not to slight them, it’s simply that it’s not fair to the other employees and it could hurt the viability of the company. Finally, make sure your children have a boss other than you, at least in the beginning. They’ll learn how to answer to someone else, and your own parental tendencies, whether that’s to be too easy on them or too hard on them, will be avoided.

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