Should You Hire Your Recent College Graduate to Work at Your Small Business?

Small business owners are often surprised to learn that it's possible to hire their kids to work for them at a pretty young age. In fact, there can be tax benefits to hiring young children -- namely, you get to deduct their earnings as a business expense. And also, if you're hiring a child under age 18, you won't have to withhold or pay any FICA tax on their income.

But while you can get away with hiring a younger child to work for your business, you need to be careful. If you claim that a young child does certain work that the IRS does not deem age-appropriate, it might choose to dig into your situation further.

Things get a lot easier when you have a child who's a recent college graduate. At this point, your child not only has a degree, but may have developed certain skills that can make them a useful member of your team. 

But is it a good idea to hire your own child to work for you? Here are some pros and cons.

Pro No. 1: There's a level of trust

If you have a good relationship with your child, then one benefit of hiring them is getting an employee you know has your best interests at heart. Say you're hesitant to turn bookkeeping over to a random hire because the information there is quite sensitive. You might have an easier time sharing your checking account details with your own son or daughter.

Pro No. 2: Employee retention may not be an issue

Some people take any old job out of college just to earn a paycheck and have something to put on their resume. But it can take time to hire and train an employee, so you'd probably rather not have to repeat the process too often. Your own child is more likely to be upfront about their expectations. And if they say they intend to work for you for a number of years, that's probably true. 

Con No. 1: If your business fails, you're both out of a job

If your child loses their job, they may end up coming to you for financial support. But if your child works for you and your company goes under, you'll both be in the same unfortunate boat. Consider the financial impact on your family overall if you hire your child. 

Con No. 2: Work issues could impact your personal relationship

It's not always easy being your own child's boss. Say your child's performance isn't up to par. You may do your best to offer suggestions for improvement gently. But if your child gets offended, now, they're not just angry at their boss -- they're angry at their parent. And if you decide that things just aren't working out on a whole, there could be long-term animosity between you and your child. 

If you have a child who just graduated from college and is looking for work, hiring them could be a good idea. That way, you get the help you need, and they get the benefit of a steady paycheck. But before you hire your recent college graduate, consider the pros and cons of doing so. And also, have an honest conversation that addresses those benefits and drawbacks so you both go into the situation on the same page.