Familial familiarity is a huge part of why lots of family businesses enjoy success. If you want to get in on this action, check out the following tips on building an ideal family-owned small business:
1. Consider an unrelated CEO or business partner.
In the world of family businesses, there is often some debate about which family member should be manning the ship and making all of the important decisions. Should it be a father? A grandfather? A matriarch? While this decision is important and necessary in many cases, it may be best to consider appointing someone unrelated to your family to take the reins. Experts say CEOs with family ties are more inclined to use family values in their decision-making. On the other side of the coin, outside CEOs or business partners with lots of power tend to be more innovative in their thinking. They do things that will benefit the business itself rather than always putting the family involved in the company at the top of their priority list. Even if a family business keeps a family-tied CEO for a long time, such a company may want to at least bring on outsiders in some capacity to strike a better balance in its overall operations.
2. Put your kids on payroll.
In terms of small business accounting, there are some IRS tax benefits to adding your youngsters to your payroll. If you employ one or more of your kids older than 7 and younger than 21 in your small business, the money you pay them may be partially or fully tax deductible with the IRS. This strategy is known as income shifting. Basically, income shifting involves taking a portion of your income and shifting it to someone in a lower income tax bracket, such as a child. It can reduce your IRS tax liability, which every small business owner tries to do in order to keep more of their hard-earned income. Kids under age 18 who earn a salary from a parent involved in a sole proprietorship or partnership are generally exempt from Social Security and Medicare taxes as well. Additionally, income earned by kids under 21 from their parents is often not subject to federal unemployment taxes, and health insurance deduction opportunities for children or spouses are available for self-employed professionals. Income shifting and tax deductions can result in big tax savings in family businesses.
3. Don’t hire everyone just because they’re in your family.
Just because someone is a member of your family tree does not mean they are suited to work in your small business. This is why the term “family business” should not cover everyone in many instances. If someone doesn’t have the skills that would benefit your company, they simply may not belong there. If they aren’t thrilled about working for you for whatever reason, don’t force them to do so because it could actually make things in the office worse. Focus on family members who have top-notch qualities or who could be molded into ideal employees.
4. Avoid lots of business discussions during off-hours.
While it’s common for families who all live together to talk about their small businesses when they aren’t working, it is best to avoid a lot of this talk. You have to get away from the grind of business ownership whenever feasible. Otherwise, it could eat you up and make your work much less desirable. The same can be said for employees and kids who help out part-time. On the other hand, communication is vital when your doors are actually open. While family members know each other so well, it’s important to talk, text, and use any other communication tools to be sure everyone is on the same page.
1-800Accountant specializes in small business accounting and consulting. If you operate a current family business or intend to start one, learn more by calling 1-888-749-0117. You can also check out www.1-800Accountant.