Is It Legal For Your Kids To Work At Your Small Business?

 
When kids turn into adolescents, it is time to teach them responsibility, and what better way than involving them in the family business. In the United States of America, the Fair Labor Standards Act (FLSA) was passed in 1938 that outlines laws pertaining to child labor in family businesses. The labor regulations for children under 18 years of age are divided into categories of ages 12 to 14, ages 14 to 15 and ages 16 to 17.

Child labor violations are taken very seriously. The Federal and state laws both ensure the safety and health of children when they are taken into employment. Also appropriate time limit and wages per day are determined by the government. Any person or business violating the set regulations can face criminal charges. There are four main aspects that need to be considered when employing your own kids at your own small business.
 

 
Tax benefits

If you hire your child in your own small business, then you don’t have to deduct unemployment, social security or Medicare taxes from your child’s wages. This gives your young employee some extra savings for doing age appropriate work, well within the law. Also labor law prohibits employing your own children when you are in government service and public service. This law protects citizens from nepotism.

 
Pay consistent wages

The wages that you pay your children must be the same as that of any outsider. For example, if you set an hour wage at $9 then you must pay your child the same as well. Also, all wages must be paid weekly or monthly whichever had been previously agreed upon. Just because your child is still under your roof, you cannot take the liberty of paying once a year or whenever suits you for any tax benefits. Tax codes are set for wages of a child too and must be religiously followed. Any act that tries to exploit a person based on the fact the employee is under 18 is considered criminal. Teaching your child the nuances of your business is indeed exciting, and hence needs to be done well within the law so that the entire experience is a memorable one for your family.

 
Social Security taxes

If your business is registered to you as a sole proprietor or as a partner, wherein your other partner is your spouse, then there is no need to deduct taxes from your child’s wages. However, if you hold an interest in the business in any other way, then social security tax must be deducted from your child’s wages. Your child will be exempt from social security taxes only if you and your spouse are partners in business.

 
Types of jobs
Jobs that come with occupational hazards like working with large machinery, manufacturing jobs or window-washing are not recommended for children. The kind of jobs that do not ensure safety is prohibited for kids. Agricultural or farm jobs are permitted for children provided they don’t miss out on their school and other educational opportunities.

 
IRAs and documentation

Once your child is employed by you, he or she is entitled to an individual retirement account. This enables your child to have savings without tax liability, and also transfer the same into his or her savings account. Your young employee can withdraw the money whenever required, and has the advantage of maintaining a tax-free account until retirement. The child must be treated as an individual employee and appropriate employee forms must be filled out for him or her. This saves any unnecessary penalties during audit.

 

 
This article was written by Marie Flounoy for Small Business Pulse
 

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