You may be seeing a lot of your kids these days, and you may continue to as you navigate the hybrid solutions of “back-to-school” this year. For many business owners during this pandemic, balancing the new family dynamics with unexpected business challenges has been difficult. While not for every business, one solution to ease the stress and get some extra help is to combine work and family lives even more and hire your kids to work in your business.
There are some good reasons to give hiring your child a try. If the business is solely owned by you (or both parents), most of the child labor laws do not apply so even younger children can be legally employed. Employing your kids to do legitimate (i.e. skill and wage appropriate) work in your business for a few hours a week may make some financial sense for both of you.
Of course, one caveat is that you have to do the paperwork to set them up as employees. Make sure you have a W4 and I-9 on file for them. Don’t skip this step! It’s also a good idea to record their hours and pay them regularly, by check.
While every situation is different, if you typically give your kids an allowance this is a much more efficient way to “transfer” funds and get something in return. This may also help to jumpstart their entry into savings and investment since with earned income they can start a Roth IRA account or help fund their education savings.
Of course, the rules can vary depending on the type of business you own. If your business is a corporation or you have other owners besides the parents then some of the benefits listed above may not apply. Be sure to double-check your situation with the IRS or your tax advisor to make sure you know the latest laws and limitations.