To Hire or Not to Hire: Unpacking the Intricacies of Employing Family in Your Small Business


Juggling Family Ties and Business Ties: Is it Worth It?

As a small business owner, the idea to hire family members can seem appealing. After all, who better to trust with your brainchild than your own flesh and blood? Still, despite the allure of working with loved ones, it’s a decision that comes with a mixed bag of pros and cons. Let’s unpack the realities of bringing relatives on board.


The Bright Side of the Family Business

The saying ‘blood is thicker than water’ might indeed hold some weight in the business world. In fact, family businesses are the lifeblood of the American economy, contributing 64% of the U.S. GDP [source: Family Enterprise USA]. Here’s why you might want to keep it in the family:

  1. Shared Vision: Who else but your family will understand and support your business dream like you do?
  2. Unwavering Trust: Family members often come with a lifetime of trust, which can be invaluable in business.
  3. Flexibility: Your sister might be more willing to pull a late shift than a typical employee.
  4. Passing the Torch: If you plan to keep the business in the family, who better to groom for leadership than your own kin?


The Family Feuds: Potential Pitfalls of Hiring Relatives

But hold your horses before you draft the job offer. Hiring family members can stir up a hornet’s nest of potential issues:

  1. Muddied Waters: Mixing business with pleasure can lead to conflicts, both at the dinner table and in the boardroom.
  2. Cries of Favoritism: Other employees may feel slighted or overlooked when promotions or perks seem to favor family.
  3. Stifled Creativity: An all-in-the-family team can often limit diverse viewpoints, putting a damper on innovation.


Navigating the Choppy Waters: How to Keep Family and Business Afloat

To make the family business a winning strategy, consider these tips:

  1. Clarify Roles: Avoid family feuds by defining responsibilities from the get-go.
  2. Fair Game: Treat your family members like any other candidates – hire them on merit, not relation.
  3. Business and Pleasure: Draw a line between work issues and family time. It’ll keep both relationships healthy.


Deciphering the Fine Print: What Does the Law Say About Hiring Family?

Throwing your teenager a summer job at your store? You’ll want to brush up on some legal and financial implications. According to the IRS, a child under 21 working for a parent’s unincorporated business is exempt from FUTA (Federal Unemployment Tax Act) tax. However, their income is still taxable [source:].

And no, paying your child isn’t a sneaky personal withdrawal if it’s for work done. It’s considered a legit business expense – just be sure it’s a reasonable amount.


Ponder Points: Making the Family-Business Decision

If you’re still in two minds about whether to hire family members, here are some thoughts to mull over:

  1. Need vs Favor: Are you hiring because they’re the best fit, or because Aunt May needs a job?
  2. Long-Term Impact: Will adding family to the mix bring more holiday cheer or cause Thanksgiving meltdowns?
  3. All Above Board: Be sure to dot your I’s and cross your T’s on the legal front to avoid any tax or legal headaches.

Deciding to hire family members is as personal as your favorite family recipe. It can make your business flourish with familiar trust and shared values, or it could stir up a family feud. So, weigh your options, consider the legal bits, and above all, ensure your decision builds both a thriving business and happy family ties.