More Than Just a Tax Strategy: The Real Value of Paying Your Family Through Your Business in 2025

Paul Belshaw
Jul 3
3 min read

Learn how paying your children or spouse through your business in 2025—especially if you're an S Corp—can reduce taxes, strengthen family bonds, and create a legacy. Belshaw Accounting explains how to legally pay family members and why it’s more than a tax strategy.

Why Hiring Your Family in 2025 Is Smart Business

As a small business owner in 2025, you may have heard that paying your kids or spouse through your business can reduce your taxes. That’s true—but it’s also so much more.

This is more than a tax strategy.This is about family, financial literacy, and building generational wealth.

At Belshaw Accounting, we help service-based businesses like contractors, real estate investors, HVAC specialists, and auto repair shop owners make the most of strategies like this. Here's how it works—especially if you're operating as an S Corporation—and why it matters far beyond tax season.

1. Tax Benefits of Paying Family Members in 2025

✅ Paying Children Under 18

If your business is a sole proprietorship or a spouse-owned partnership, the IRS allows you to:

Hire your minor children (under age 18)
Avoid FICA (Social Security & Medicare) and FUTA (unemployment) taxes
Deduct their wages from your business
Pay them up to the standard deduction limit ($14,600 in 2025) tax-free

These wages are not only income-tax-free for your child, they’re also 100% deductible for you.

⚠️ What About S Corporations?

If your business is an S Corporation, the IRS does not exclude your under-18 children from payroll taxes. That means:

You must withhold FICA/FUTA on their pay
You lose some of the key tax benefits

🧩 Solution: Use a Family Management Company (FMC)

Many S Corp owners overcome this by creating a Family Management Company (FMC). Here's how it works:

Set up a Schedule C sole proprietorship under your name or spouse’s name
The FMC provides services to your S Corp (e.g., marketing help, cleaning, admin)
Your children are paid by the FMC, not directly by the S Corp
Because it’s a sole proprietorship, their wages are exempt from FICA/FUTA and income-tax-free up to $14,600

✅ Tax benefit preserved

✅ Fully legal and IRS-compliant (with proper documentation)

✅ Legacy-building in action

✅ Paying Children Over 18 or Spouses

Payroll taxes do apply for children over 18 and for spouses
But wages are still deductible, and can fund:
- Roth IRAs
- College savings
- Health coverage
- Retirement contributions

📌 Always ensure reasonable wages for real work, maintain time logs, and issue proper W-2s.

2. More Than a Tax Strategy: Building Wealth, Character, and Connection

💰 Teach Financial Literacy Early

When your children earn income from your business, you’re not just reducing your tax bill—you’re teaching lifelong money skills:

Budgeting
Understanding pay stubs and taxes
Saving and investing (especially with a Roth IRA)
Delayed gratification and long-term planning

Belshaw Accounting encourages clients to start early—even 10-year-olds can learn the basics of earning and saving.

👨‍👩‍👧‍👦 Strengthen Family Bonds and Shared Purpose

Working together in a family business:

Builds trust and communication
Reinforces values like responsibility and hard work
Helps your children feel included and empowered

This strategy gives you more than money—it gives you time and purpose together.

🧠 Real-World Business Skills

Tasks like:

Scanning receipts
Managing social media
Packing inventory
Filing or office help

...all build soft and hard skills your children will carry into any future career.

3. The Family Board Meeting: Financial Education That Lasts

We recommend holding a quarterly Family Board Meeting, where you:

Discuss family finances, goals, and milestones
Celebrate contributions made through the business
Teach budgeting, investing, giving, and stewardship

Pair this meeting with a paycheck, and you’re delivering practical financial education that school never will.

4. How to Start Paying Your Family Legally in 2025

Here’s your 2025 checklist from Belshaw Accounting:

✅ Identify legitimate work

✅ Set a fair hourly rate

✅ Document job descriptions and hours

✅ Pay through your business (or an FMC if you're an S Corp)

✅ Open a Roth IRA or custodial savings account

✅ Track everything

✅ Schedule your first Family Board Meeting

✅ Talk to your accountant to ensure compliance

Legacy Over Loopholes

Paying your children and spouse through your business in 2025 isn’t just about saving taxes—it’s about building something that lasts.

✅ You teach your children to earn and invest

✅ You spend more time with those who matter most

✅ You strengthen your family’s financial foundation

✅ You pass on values, not just wealth

At Belshaw Accounting, we specialize in helping service-based businesses implement strategies like this legally, ethically, and strategically.