Hiring my children as an employee at my LLC

[Dana N.]

I read that I can hire my children to work at my home base business, which is an LLC. We live in NYC, but our LLC is filed in NC. Question: If I hire my 11 year old as an employee to do of course reasonable work for a reasonable wage, do I have to with hold taxes and if so which state to I do file his employment NYC or NC? Thank you

[Mike McDermott]

Do you have a website? Do you have your family's pictures on it? There actually is NO AGE LIMIT for paying your children. There is a limit as to what you can pay them for services performed. You would be hard pressed to justify $5,950 in income to a two year old for appearing on a website. It is possible, however, to contact an advertising agency to find out how much child models receive, then pay your kids accordingly. So if Johnny Jones receives $X for appearing in a newspaper ad, or on a website in his romper, then your child can get paid that too. Bear in mind also that ALL child labor laws apply, so you can't have your 10 year old hauling bales of shingles up on the roof. Similarly, the services have to be legitimate: light-leaver-onner and toy-strewer will not fly.

So, in short, you can pay your child whatever is reasonable and standard for the services performed, and those services must be legitimate and fall within the guidelines as laid out by state and federal child labor laws. If both parents are partners and employ the child, there is an additional savings on FICA and Federal Unemployment Tax (FUTA).

Here's an extreme example. A couple films the delivery of their last child. For training purposes they sell the tape to the hospital, to a couple of midwives, to the local Lamaze teacher, and to a couple of clinics. They ascribe the income to the child, who, after all, starred in the film. Legitimate income? You bet! Age? Still glistening.

Find a creative accountant who thinks as far outside the box as you do, and start saving on all those taxes.