We pay taxes on all our incomes. May it be from wages or may it be from your business. If you are a businessman your endeavor will always be to reduce as much Tax liabilities as possible by showing your legal expenses and liabilities. One of the legal means to save taxes by any small business enterprise owners is to pay their children under 18 years of age, adult children and even the grandchildren. This has been the most under utilizes strategy to reduce tax liabilities by small business owners having a family.

This strategy has two fold advantages: Firstly, your children get involved in your business at an early age, this prevents the trends in the children to leave home without even learning the basics of how to earn one’s living, and they have no idea of work ethics, management of money and concept of entrepreneurship. Secondly you save tax by involving labor available at home. Another major advantage of this strategy is that you are not required to pay for Workers Compensation Insurance and you do not withhold any payroll taxes.

The children are not liable to pay taxes for their $5800 first earning in the year. (Standard Deduction) plus you too are exempted of paying tax on first income of up to $5800 and you also claim exemption of taxes for paying wages to your own children.

You are likely to enjoy many more tax benefits, you are able to create your unsecured business credit, and you qualify for small business loans. More your family gets involved in the business, more you benefit for exemption of taxes. You pay to your own children from your income and save tax and your income is not going out of your family, it is with your children, plus your children are learning to earn, learning the basics of your business, getting the feel of ownership and lending a valuable helping hand to you. Remember, you must make your children work for their earnings. Paying without doing any work will not help to build them as an Entrepreneur..

A child’s parents holding proprietorship or partnership (LLC) of any business are allowed by the IRS to pay wages to their children less than 18 years of age without withholding pay roll taxes. However, if you own an S or a C- Corporation you are not authorized to enjoy this facility, if you pay your children you have to withhold payroll taxes.