Hiring A Family Member: Tips To Doing It Right (Karl Henry)
Sep 1, 2010
There are negative and positive points regarding hiring a family member. This may be a great choice, or the worst choice you ever made. It all depends on their level of skill, willingness to learn and dedication.
Quite often people bring on members of the family because they require work, even if they do not have the necessary abilities to get the job done. What this means is you're having to pay somebody who's not really adding much to the organization.
And you'll feel really guilty about firing them, so you may have to keep them for the long term. This means they could slack off, understanding you won't get rid of them.
That's the downside.
On the upside, if they are a great employee and possess the skills needed, hiring somebody within your family has obvious benefits. To begin with, you know them. Therefore, they may feel a duty not to disappointed you. Everything depends on who you hire.
Are there financial benefits to employing family members?
Yes there are. From the financial side it definitely makes more sense to bring on family members. For one thing, it can offer you a tax break, while keeping the money in the family.
This can be a great strategy in terms of switching money between people in the company. It does not break any kind of laws and regulations, and can spare you taxes.
For instance, in the event that Jim brings on his wife, he can pay her a salary, and then write that off as a business expense. Consequently, the money will stay in the family, but will still be tax deductible.
However, you cannot pay them a ridiculous amount. The IRS is completely conscious of the tax advantages of this tactic. Consequently, they do not allow you to pay your family members much more than the regular rate to do the job they are doing.
You can save on health coverage as well. In the event that Jim is covered under the same policy as his spouse, he can then deduct that policy as a business expense. The reason being each work for the company.
Therefore the bottom line is, there are dangers as well as rewards from hiring your loved ones. Whether it works or not will depend on whom you employ.
If you get someone with a good work ethic as well as who has the skills necessary, this can work out very well. However, when you hire somebody who does not have the right abilities, this can backfire on you.
Therefore do not ever just bring someone in for the tax advantages or to be nice. Make sure to very carefully assess their talents. The main thing to remember is not to bring in anyone just since they're family. If you would not hire them if they weren't family, then do not hire them.
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