Hiring Your Teenager Can Be a Win-Win

A tax break is only one bonus for small-business owners who hire their kids.
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CHICAGO (TheStreet) -- It's been another rough year for teen job-seekers. High schoolers have to compete with unemployed adults for retail positions at the mall, while local budget cuts mean fewer openings for traditional summer jobs such as lifeguards and camp counselors.

Which makes it the perfect time for small-business owners to give the younger generation a chance. Whether it's your own kids, teenage relatives or the children of family friends, providing a summer job in your business will help them earn some extra money, learn skills and boost their confidence.

"I'm a big believer in getting kids involved in your business whenever you can," says Peter Johnson, director of the

Institute for Family Business at the University of the Pacific

in Stockton, Calif. A 6- or 7-year-old can help stuff envelopes for a mailing; older children can unpack inventory or keep the company's Web site updated.

"One of the biggest problems family businesses have is when a son or daughter graduates from college and is expected to come into the business," he says. "Many times they'll say no, because all they've heard are the negative things."

It's natural to come home and complain about what went wrong at work, rather than celebrate what went right. But children who are never exposed to the day-to-day rhythms of your company might never understand its ups and downs. Giving them firsthand experience of what you do shows them the reality of your business and helps them visualize a possible future role there.

"It's a great opportunity to give your child the tools to discover if the business is right for him or her," Johnson says. "Whether or not they end up choosing to work with you, they have an actual picture of what the business is like, good and bad."

A bonus for business owners who hire their teenagers? They get a tax break. If your business is unincorporated and the child is younger than 18, you don't have to withhold FICA or federal unemployment taxes.

To make sure the arrangement is aboveboard taxwise, treat your child as a regular employee, with the accompanying paperwork to back it up. First and most importantly, make sure your child is doing a well-defined job essential to the running of your business. Make-work projects don't do your child any good, and they won't withstand the scrutiny of an audit.

Pay your child a reasonable amount, comparable to what you'd pay a nonfamily member, and give him or her a regular paycheck, just like any other employee. Paying out one large lump sum at the end of the summer could be a red flag for the IRS.

The parent-teen relationship has its challenges, and working together can make it even more complicated. The key, Johnson says, is to be upfront and professional in your expectations. "You have to lay out the ground rules," Johnson says. "If you make it a real job, it sets a precedent that you don't get paid just for showing up. You have to do something for your paycheck."

If possible, have your child report to a nonfamily member and ask for honest assessments of their performance. That sends a clear message to other employees that the boss' kid isn't getting any special treatment.

A child who has already interacted positively with other workers will benefit from that good will if they decide to come into the business as an adult. For a teenager, a summer job at the family business isn't just about earning some spending money -- it's an opportunity to build credibility. "If nonfamily employees see a son or daughter work hard, they'll accept that person more," Johnson says. "And if your child can one day say they started out at the company sweeping floors, it not only builds respect -- it gives them a sense of accomplishment."


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Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago and other national magazines.