If you practice good business law, running a family business can be a great way to make money and ensure that your family members are employed, as well. Family-run businesses are often very successful due to the fact that many employees have a personal stake in the success of the company. There are special regulations that make a family business different, however. The business law guidelines are discussed in depth below.
Business Law 101:
Business Law Consideration #1 – Spouses Working Together
If you are considering starting a business with your spouse, there are many factors to consider prior to doing so. Having a solid marriage is the single most important factor, with effective communication as one of the key contributors. Additionally, partners should be able to work with each other as a team, rather than be competitive. Finally, it is crucial that home and work life be kept as balanced as possible – this means hopefully keeping ‘shop talk’ to a minimum when spending quality time with your spouse outside of the office.
Once the above factors have been taken into consideration, the next step is to speak to a qualified tax professional and an attorney who specializes in business law about how to legally structure your new business. This is important because there are a number of factors that contribute to whether the business can be considered a corporation, a partnership, or an LLC. After speaking with a professional in your area of business law, you will be able to decide which choice is best for your business.
Business Law Consideration #2 – Employing Your Parent
When paying a parent employed by you or your company, the business law guidelines may be different. For instance, payments are probably not going to be subject to Federal Unemployment Tax. Payments also may or may not be subject to Medicare Tax and Social Security, depending upon the circumstances. Again, speaking with a tax professional and a business law attorney is highly recommended in this situation.
Business Law Consideration #3 – Employing Your Children
Many times in a family business, your child or children will become a crucial part of the workforce. Not only does employing your child bring extra income into the household, but it can also help teach adolescents and teenagers responsibility, teamwork, and a sense of accomplishment.
The first thing to consider when deciding whether or not to employ your child is how you can do so within the child labor law regulations. There may be exceptions to these business laws in some cases of a child working for their family’s business, so long as no child under 16 is performing any hazardous work.
As far as taxation of a child’s pay is concerned, this often falls under different guidelines than taxing a non-family employee. Sometimes payments to children are not subject to Medicare Tax or Social Security withholding. It is important to reference a business law professional if you are unsure, though. In addition, business law states that payments to children who are under the age of 21 also may not be subject to the Federal Unemployment tax.
Integrate Good Business Law into Your Family Business Today
Starting a family business is a great way to bring your family members closer together and give them a sense of pride in their collective teamwork; however, practicing good business law is of the utmost importance. Before starting any type of business, family or otherwise, it is always best to consult with an attorney and a tax professional to make sure you are following the business law guidelines set up by your state and federal government.