In a competitive market, family businesses require the assistance of each and every family member in order to get ahead. Of course, business owners must be reasonable when recruiting family members, for not only do parents want to avoid depriving their kids of a happy childhood, they also must remain in compliance with federal and local labor laws. The maintenance of full compliance may not be possible without regular feedback from business lawyers chester county. In addition to providing targeted advice regarding current labor regulations, the right business lawyer can also help family businesses make the most of child employees when that dreaded tax season arrives. The following are a few of the potential benefits available to business owners who hire their own children:
Children's Earnings And Tax Rates Although many family business owners are accused of employing their children merely so that they can pay substandard wages, the Fair Labor Standards Act (FLSA) mandates that child employees are paid fair wages for work that, without their help, would be completed by other employees. As such, earnings above minimum wage can be expected for most family businesses, with many kids actually earning more than they would while working at fast food restaurants or in other common teenage positions.
The true benefit of employing children (other than the ability to truly be referred to as a family business) involves significantly lower tax rates. Money paid to a child does not have to be taxed as business income. Because most kids simply work on a part-time basis during the summer months, taxes on this income are generally wiped out after the standard deduction is taken. Family Employees And Payroll Taxes Significant payroll tax exemptions may be available to sole proprietors who employ their own children. Children under the age of 18 who are employed by parents are exempted from FICA taxes, while those under the age of 21 may be eligible for FUTA tax exemptions. These exemptions are not available for all family businesses; incorporated businesses or those involving non-parent partners are not eligible for FICA and FUTA exemptions for child employees.
By hiring children, parents can save significantly on taxes, all while teaching their kids the value of a dollar and preparing them for their own future careers. However, parents who choose to take this route must be very careful; tax benefits do not necessarily outweigh potential compliance issues.
