Is It Possible To Hire My Family To Help Me With My eCom Business?
In this video, I want to explain to you a frequently asked question at the firm: Is it possible to hire my family to help me with my online business? So we often get clients at our agency that run a family business, but they are unsure if what they do is considered legal or grey.
So I am here to set the record straight with you and let you know that having family members work in your business is perfectly legal if you meet a couple of critical conditions, so pay attention to this next part.
But first, let me tell you a little quick story.
Not too long ago, the IRS noticed a popular trend where business owners would hire many family members to work in their family business.
Now you may be wondering what’s wrong with that, Alan?
You just told me it is perfectly legal? Well, here’s the kicker…what they noticed on the record is they would have their 5-year son Timmy be the head of marketing and earn 90K a year while doing it. Their 9-year-old niece Sally was the logistical lead for North America. It was furthermore gifted 200K of stocks in the company…yeah so the IRS didn’t like this misrepresentation, so they created a special law called the kiddie tax in 1986, which cracked down on unearned income and investments.
So on paper, this discourages transferring gifts of stocks and other investments. Still, it also establishes guidance that the family member’s job has to be legitimate and reasonable in the market.
So with that story, I hope it helps illustrate this point: If you want to hire your son Mark who has a marketing degree, to be the head of sales and your aunt to help with paperwork since she’s an experienced receptionist, that is perfectly fine and a great way to reduce taxable income for you.
Family Income Splitting
So the concept is called Family Income Splitting. It allows you to split your income so it doesn’t all get taxed at the highest bracket. For example, you have an ecommerce business making 300k Net Profit -What you can do with family tax splitting is recognize 200k yourself and split the remaining 100k to other family members, such as your son or nephew joining your company.
Although your 200k will be taxed at a high bracket, the 50k for each family member falls into a lower tax bracket.
This way, the overall net profit is split amongst several individuals, which allows you to take more significant advantage of the lower tax bracket and put more money in your pocket at the end of the day.
There are some other details to check for, but if it interests you, feel free to drop a comment below, and we can maybe set up a consultation call to see if I can help you guys set that up.
Please take advantage of all these tax deductions available to you, as they can help support a more robust bottom line for your business- no one likes giving free money away, right? And that’s what you are doing when you are NOT hiring someone who understands your business and can take advantage of everything you are qualified for. So if your business is looking for an all-in-one solution to save on taxes and has great bookkeeping done on your behalf, then you can click the link in the description and book a free consultation call with FCF Agency. We will see if we can be a great fit together.
Before this video ends, I want to let you know that the tax code is made to help small businesses succeed and grow, so don’t be afraid!
Small businesses always come up to me to tell me they are afraid to grow their businesses because they are worried they will get taxed more, but that can’t be further from the truth.
Make sure you gain the knowledge and awareness of how to conquer the tax code and save yourself a load of money this year for your brand or business so you can keep scaling to the moon! We can’t wait to see you all succeed and be a tiny part of the journey.