25 Nov Can I hire my minor child to work for my company?

Q. I am a New Jersey resident and have a business in the state. Can I hire my child to work for me? He is 7 and can clean the office and empty the garbage cans. My business is an LLC.
— Business owner

A. Many small businesses owners hire their children.

It’s not just so the kid can make some money and learn responsibility. It’s also for the potential tax benefits to the business.

Generally, minors working in New Jersey need to have an employment certificate or working papers, said Evan Drury, a chartered financial consultant with U.S. Financial Services in Fairfield.

During the day, they need a 30-minute break for every six hours worked without a break, he said.

Under 18, a child cannot work more than six days in a week and can’t work above 40 hours a week, and it must be done after school hours, Drury said.

“Specifically under federal law, children younger than 16 years of age working in nonagricultural employment in a business solely owned by their parents may work any time of day and for any number of hours,” Drury said. “Payments for the services of a child under 18 typically are exempt from FICA taxes.”

Wages are typically subject to income tax withholding unless the child claims an exemption for it, he said.

“There is a potential here to contribute to a Roth IRA up to $7,000 or their earnings, whichever is less,” he said. “…Meaning if you pay your child $3,000 in a year, a contribution can be made up to $3,000. It’s based on earned income.”

Before you make any moves, you should check on your specific situation with a labor attorney and your tax preparer.

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This story was originally published in November 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.