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Legal Ways to Save by Hiring Your Kids

By Ephrat Livni, Esq. on July 07, 2016 | Last updated on March 21, 2019

The kids are out of school, hanging around, and you want to put them to work. You should. It's a good idea for many reasons. Hiring your kids has both long-term and short-term payoffs.

You can keep an eye on the tykes while presenting a solid work ethic and helping them learn to appreciate of the family business. The summer working together can teach you to communicate with your kids as mature adults, a skill you will need soon enough. They'll earn money, and you keep funds in the family. Plus, there are tax breaks!

Tax Tips When Hiring Your Kids

If you put your children to work, there are certain payments you won't have to make, and that can mean your seasonal labor is cheaper than you ever imagined. You can pay out less and pay your kids, which is a win-win.

  1. Worker's Compensation Considerations: Because your children are likely covered by your health insurance already, you can exempt them from worker's compensation payments, which saves your business money. If something should happen at work, the same insurance that would otherwise have covered the child applies, so there's no risk.
  2. Payroll Tax Exemptions: According to Entrepreneur, sole proprietorships and Limited Liability Companies (LLCs) do not have to withhold payroll taxes from their kid-employees, or contribute on their behalf. That is an added savings for you and a boon for your kid.
  3. Family Management: If your corporation doesn't qualify for the payroll tax exemption, there are legal ways to avoid withholding payroll tax on your child. Creating a family management company and an alternate corporate structure can allow your existing corporation to pay family employees through the management company.

Of course, there are many things to think about when hiring your kids. Talk to a lawyer about the practical aspects while you mull over the emotional benefits of this arrangement. It will no doubt teach you to see your children with new eyes.

Consult With Counsel

If you are hiring your kids this summer or are worried about any aspect of your business operations, consult with counsel. Get guidance.

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