Hiring your children to work in your business can have several tax benefits, provided that certain conditions are met. The pay and duties must be appropriate for their ages. This is a great way to involve your children in the business and pay them for work you would have paid someone else or had to do yourself. According to the IRS and several court cases, age 7 is the youngest age that has been acceptable.

Implementation:

• Create a Family Management Company

Sole Proprietorship: Wages paid to your children under 18 are exempt from Social Security and Medicare taxes.

• Assign Real, Age‑Appropriate Work & Track Hours

Give each child genuine business tasks, log their hours daily, and keep time‑sheets or digital logs as proof.

• Pay Your Children

For children under 18, pay your child by simply transferring money from the business account to the Family Management Company. The Family Management Company will then pay the children to their accounts. You do not need to issue a 1099 or W-2 to the child.

• Maintain Records & Monitor Tax Thresholds

If they earn less than the standard deduction amount ($15,000 in 2025), they won’t owe federal income taxes. So, no action is needed, you’re not required to file a tax return. If your child  earns more than the standard deduction, they will need to file a tax return.

Keep all time‑sheets, pay records, and task descriptions.