Hiring Your Children – Belk on Business – Episode 198
1) Complete all normal employment paperwork
2) Wage must be reasonable and comparable to other employees or others doing the same work
3) If your LLC is taxed as a disregarded entity or is a multimember LLC owned by the parents, no FICA if under 18 and your child and no FUTA if under 21
4) If Corporation, S Corporation or LLC taxed as a corporation, can set up management company owned by parent (sole proprietor or SMLLC) – pay legitimate management fee then pay child
5) Child must be paid through payroll as a W-2 employee. No federal income tax up to standard deduction ($14,600 in 2024). State withholding amount will depend on state’s exemption amount. Federal and state tax returns generally should be filed
6) The work performed by the child must be related to the business. Separate work and personal jobs
7) Can fund IRA or Roth IRA up to the lesser of earned income or $7,000 (2024)
8) Federal law generally permits children to work for businesses entirely owned by their parents, except mining, manufacturing, and any other occupation the Secretary of Labor has declared to be hazardous
9) Some states have age restrictions on top of the federal law, so check the specific labor laws in your state. States will have a minimum age for employment, what type of work is prohibited and what hours are permitted for work that cover both during school time and non-school time.
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