Last updated: January 2026
If you own an LLC and want to put your kids to work, you're not alone. Thousands of business owners hire their children for legitimate business tasks, and for good reason. It teaches kids valuable work skills while creating potential tax advantages for your family.
But doing it correctly matters. The IRS scrutinizes family employment arrangements, so you need to understand the rules before writing that first paycheck.
This guide walks you through everything you need to know about paying your kids through your LLC in 2026.
Why Pay Your Kids Through Your Business?
Hiring your children for real business work offers several benefits.
For Your Kids
- Learn responsibility and work ethic
- Gain real-world business experience
- Start building earned income for Roth IRA contributions
- Develop financial literacy early
For Your Business
- Wages paid are a deductible business expense
- Get help with legitimate tasks that need doing
- Keep money in the family while reducing taxable income
For Your Family
- Shift income from your higher tax bracket to your child's lower (or zero) bracket
- Potentially save on payroll taxes depending on your business structure
- Build your child's financial foundation early
How Tax Treatment Depends on Your LLC Structure
Not all LLCs are created equal when it comes to hiring your kids. The tax treatment depends entirely on how your LLC is taxed.
Single-Member LLC (Taxed as Sole Proprietorship)
This is the most favorable structure for hiring your children.
If your child is under 18 and works for your single-member LLC:
- No Social Security tax (employer or employee portions)
- No Medicare tax
- No FUTA (federal unemployment) tax until age 21
Your child can earn up to the standard deduction amount ($16,100 in 2026) without owing any federal income tax. You deduct their wages as a business expense.
Multi-Member LLC (Taxed as Partnership)
If your LLC is a partnership where both partners are the child's parents, the same favorable rules apply. No FICA taxes for children under 18 and no FUTA for children under 21.
However, if your LLC partnership includes anyone other than the child's parents, the payroll tax exemptions don't apply. You'll need to withhold and pay all standard employment taxes.
LLC Taxed as S-Corp or C-Corp
If your LLC has elected to be taxed as an S-Corporation or C-Corporation, the FICA exemption does not apply regardless of your child's age.
You'll need to:
- Withhold Social Security and Medicare taxes
- Pay the employer portion of FICA
- Handle payroll like any other employee
The wages are still deductible, and your child may still be in a lower tax bracket, but the payroll tax savings disappear.
Consult your CPA about whether your current structure makes sense or if adjustments could benefit your family.
What Kind of Work Can Your Kids Do?
The IRS requires that work be legitimate and wages be reasonable. You can't pay your child $50/hour to do nothing, and you can't deduct payments for household tasks unrelated to your business.
Legitimate business tasks vary by age:
Ages 6-9
- Shredding documents
- Organizing supplies
- Simple filing
- Sorting materials
- Cleaning the office space
Ages 10-13
- Data entry
- Inventory organization
- Labeling and packaging
- Basic spreadsheet work
- Answering simple emails with supervision
Ages 14-17
- Social media management
- Customer service assistance
- Bookkeeping tasks
- Content creation
- Website updates
- Administrative support
Ages 18-21
- Most business tasks appropriate for any employee
- Note: The FICA exemption no longer applies at 18 for LLCs taxed as sole proprietorships or partnerships
The key question: Would you pay someone else to do this task? If yes, it's likely legitimate. If you're inventing work just to justify payments, the IRS may disallow the deduction.
Step-by-Step: How to Set It Up
Step 1: Verify Your LLC Structure
Confirm how your LLC is taxed (sole proprietorship, partnership, S-Corp, or C-Corp). This determines your payroll tax obligations.
Step 2: Create a Job Description
Document the role in writing with:
- Job title
- Specific duties
- Hours expected per week
- Hourly rate
This isn't just good practice. It's essential documentation if the IRS ever asks questions.
Step 3: Determine a Reasonable Wage
Research what you'd pay a non-family member for similar work using:
- Local job listings
- Bureau of Labor Statistics data
- Industry salary surveys
For younger children doing simple tasks, minimum wage or slightly above is typically reasonable. For teenagers with real skills like social media management, market rates may be higher.
Step 4: Track Hours Worked
Maintain accurate records showing:
- Date worked
- Hours worked
- Tasks performed
This is critical documentation.
Step 5: Pay Your Child and Document It
Pay your child through a traceable method like check, direct deposit, or a payment app with records. Avoid cash payments since they're harder to document and raise red flags.
Step 6: Work with Your CPA on Tax Filings
Your CPA will handle:
- Quarterly payroll tax filings if required
- Year-end W-2 preparation
- Proper reporting on your business tax return
Provide your CPA with organized records of all payments and hours worked.
Common Mistakes to Avoid
Paying for household tasks. Mowing the lawn at home, doing dishes, or cleaning your house are not deductible business expenses even if you work from home. The work must be for your business.
Overpaying. Paying your 10-year-old $30/hour raises red flags. Keep wages reasonable for the work performed and your child's age and skill level.
Poor documentation. No time records? No job description? No proof of payment? The IRS may disallow the entire deduction.
Inconsistent payments. Paying your child $5,000 in December with no payments the rest of the year looks suspicious. Establish a regular pay schedule that reflects actual work performed.
Ignoring state rules. Some states have additional requirements for employing minors, including work permits and hour restrictions. Check your state's labor laws.
How Kids Payroll Helps
Kids Payroll was built specifically for business owners who want to pay their children compliantly.
The app helps you:
- Track work hours with a kid-friendly interface
- Choose from age-appropriate job templates
- Calculate earnings automatically
- Export audit-ready documentation with one click
Your CPA handles the tax filings. Kids Payroll gives them everything they need in a clean, organized format.
Frequently Asked Questions
Can I pay my child through my LLC if they're under 10?
Yes. There's no federal minimum age for a child to earn income. However, the work must be age-appropriate and legitimate. A 7-year-old can shred documents or organize supplies, but complex tasks aren't realistic.
Do I need to pay my child minimum wage?
Federal law doesn't require minimum wage for children working in their parents' business. However, paying at least minimum wage strengthens your documentation and makes the arrangement look more legitimate.
Can my child work unlimited hours?
Child labor laws still apply. Check your state's requirements for work permits and hour restrictions, especially during the school year.
What if I get audited?
If the IRS questions your child's employment, you'll need to provide:
- Job description
- Time records showing hours worked
- Proof of payment
- Evidence the wages were reasonable
This is why documentation matters from day one.
Disclaimer: This article is for educational purposes only and does not constitute tax or legal advice. Consult a qualified CPA or tax professional for guidance specific to your situation.