WHEN DEAN BARBER, founder of the Barber Financial Group, a wealth management firm in Lenexa, Kan., hired his wife Kim about 12 years ago, their goal was to save money.
Dean needed to hire someone but was also in a pinch financially. So he turned to his wife, who had been home raising five children, and began paying her a modest salary to oversee marketing and human resources. He thought: “Her giving up her time would be less costly to the company as a whole than hiring an additional person.” Today, the now thriving 21-year-old company has 20 employees, clients in 30 different states and earns roughly $2.4 million in revenue. And more than just cheap labor, the real benefit of having Kim around is that “there’s nobody else who is going to care as much about your business as you and your spouse,” he says.
Barber Financial Group founder, Dean Barber, hired his wife Kim to save money on labor and help the business grow.
While hiring a spouse will likely lead to one or two lover’s quarrels , the benefits can often outweigh potential downfalls. Indeed, say small-business consultants and accountants, whether it’s moral support, less expensive labor or lower health-care costs, hiring a spouse can provide a number of advantages.
Here are few ways to benefit from putting your loved one on the payroll:
A Personal Interest
As Dean Barber found, the main benefit to hiring spouses is that “they have a personal interest in the company,” says Carmen Bianchi, president of the Family Firm Institute in Boston. Being that couples, in many states, share each other’s assets, whether or not a business is profitable typically also impacts a spouse. As such, if you’re in a bind, a spouse may be more willing to work longer hours for less money than a regular employee. “That’s why family businesses do better than regular businesses during a down economy,” she adds.
Business owners also might want to think about hiring their kids. Here are three reasons to put your teen to work:
Save on taxes. If you’re a sole proprietor or unincorporated business owner and typically if Junior is under 18, the wages a child earns from working for you aren’t subject to Social Security and Medicare taxes. And like spouses, you won’t owe federal unemployment tax either. You may, however, need to withhold federal and state income taxes from their wages.
Putting your kids on the payroll can also lower your taxable income. For example, if you were in the 28% tax bracket, and you paid your teen $10,000 to do filing and other odd jobs around the office, you’d lower your tax bill by $2,800. Dependent children can save on their earnings as well. For example, junior can earn wages up to $5,450 (the 2008 standard deduction) and not owe federal income tax.