The big order comes in and it’s all hands on deck to get it processed and out the door. Photographing, packaging, and post office visits. If you have kids in the house there is a good chance you asked them to help, just to get the work done and maintain a level of sanity. Did you pay them though?

Parenting philosophies differ widely on bringing kids into a family-run business. Some of us want to keep it separate – family and business – some of us fuse those terms and just call it a family business. Most of us likely fall somewhere in between. Regardless of where you land, having the kids work with/for you has a number of benefits and very little risk – unless you work with hazardous materials or dangerous equipment!

I have used my kids to stuff pattern envelopes, sort fabric, hold quilts, and model for photos. We take the viewpoint that our businesses are family operations so their help is necessary and expected.

I don’t pay them. But after learning more about bringing the kids onto payroll, I may change that.

From a practical point of view, there are two reasons to get your kids working with you. One, if you need the help, they can be accessible, part-time labor. If your house is like mine, your kids seem to always be there, practically underfoot. It means I don’t need to advertise for help or hope I can fit into a busy teen’s schedule. It’s easier to have my kids work for me than locate a babysitter.

And two, paying your kids reduces your income via a legitimate expense. This can potentially reduce your own taxable income. However, this needs to be done correctly in order to benefit from the deduction.

First and foremost, if you pay your child to do work for you then it has to be work you would pay someone else to do, and you must pay them a reasonable wage.

Putting the Kids on the Payroll

This means you need to actually set up payroll for your business. According to Northard, this is easier than you might think:

1. Work with a payroll company, like Gusto, to manage payroll and payroll tax forms.
2. Get an employer ID from the IRS.
3. Keep a time sheet (or have your child keep one) to prove they actually did the work.
4. If you are paying your child above minimum wage, document how you arrived at that number.
5. Keep documentation that the funds were actually deposited into the child’s bank account. Avoid just handing out cash.

Artist and surface pattern designer Bari J. Ackerman has hired her own kids and her kids’ friends to help in her home studio. Making animations, sewing, shipping, and computer work have all been on the task list. When asked what her advice is for anyone considering this, Ackerman says, “Set regular hours and make sure they’re prepared to treat it like a real job.”

It may seem onerous to do the paperwork, but it is worth it. According to Northard, paying the wage through a payroll system should ensure that federal income taxes are withheld from the child, as long as the business owners/parents own a sole proprietorship or partnership between the parents. And as long as their total pay for the year is less than their standard deduction ($12,000 for 2018 individuals), they will not have to file or pay taxes on the wages.

Keep in mind that this is how it works in the United States. Canadian laws are similar. Check your own country/state rules for specifics.

Confession: my first thought was about child labor laws more than the economics.  Was it legal to have my kids stuff patterns for my business? Turns out it is. That’s because of the family business aspect. Employment by parents is allowed under the age of 14, as long as the work isn’t mining, manufacturing, or dangerous, according to the United States Fair Labor Standards Act. State-by-state the specific laws regarding age and payment vary, so always check your home location for specifics. All of this assumes you are a formal business, with the appropriate designations for sole proprietorship, incorporation, and licensing.

From a parenting point of view there are also good reasons to have your kids involved in your family business.

“If I have the opportunity to teach my kids about business, about people, then they are going into the world knowing more and being a better person,” says Valorie Wells.

Wells is an artist, fabric designer, and now the owner of Stitchin’ Post in Sisters, Oregon. She grew up in the quilt store, taking over from her mother, Jean Wells, after more than 40 years in business. Now her own kids are involved in many aspects of the work.

Growing up, Wells says that she was compensated and never felt taken advantage of working in her mom’s store. And when she decided, as an adult, to come back to Sisters, she asked her mom if there was an opening at the store. Indeed there was, but Wells still interviewed for the position. Nothing was a given.

With her own kids, Wells believes that it is a good thing that they come to the store and help. If work needs to get done on a Sunday afternoon, for example to set up for the week’s classes, it goes faster if the whole family helps out. And then they get more family time.

“Part of being born into this family is that it is a family business.”

It’s a basic expectation that the kids will help out. But it is more than that to Wells. “My kids understand so much more about what it takes to run a business. You learn how to have good customer service, be nice to people. I don’t think it hurts any kid to work in the service industry to be a good person, in general.”

In the end, the kids learn the benefits of work, understand a business more, get a paycheck, and gain an appreciation for service. You get time with your kids when you might otherwise be hunkered down. Not to mention a legal tax advantage.

Does this mean that you have to get formal if you are simply having your kid help out now and then? No. But if there is a tax/income benefit for you both, it might be a win/win situation. This is business, but that will, like any parenting decision, be a personal decision.