One of the greatest advantages of running a family business is that you can pay your children to work FOR YOU. When you hire your kids, you’re not only instilling a strong work ethic but you’re keeping the wealth in the family.
Hiring your kids comes with some significant tax-saving benefits as well. With the passage of the Tax Cuts and Jobs Act (TCJA), those tax benefits are now even greater than before.
In 2018, the TCJA doubled the standard deduction, which increased from $6,300 to $12,550. So now, your children will pay zero federal income tax on anything they earn up to $12,550. This tax break alone can save thousands each year.
If your business is:
a sole proprietorship
a husband-wife partnership
a single-member LLC taxed as a sole proprietorship
or an LLC taxed as a husband-wife partnership
You might not be required to withhold or pay any Social Security, Medicare tax, or federal unemployment tax on your kid’s wages!
Still there are things to consider when looking at the qualifications for specific tax breaks, that’s where we come in. There are many work-arounds for corporations to use and we know how to help.
For example, instead of paying your kids directly from your corporation, you can create a family management company and pay them from that business. Something as simple as setting up this new company separate from your primary business and paying your children from it, means you won’t have to withhold payroll taxes.
There has never been a better time to put your kids on the payroll. As your Family Business Lawyer®, we can help you identify your liabilities, mitigate any legal risks and get you on the right track for success. This will allow you the freedom and energy to focus on growing your business. Schedule your LIFT Strategy Session with Truest Law today by calling us at 480-949-6500.