Federal Hiring Rules for Parent Owned Businesses

Summer is official here, and that means your 100% parent-owned sole-proprietorship or partnership may be able to hire your children to help them earn some summer fun money and help your company. As a reminder, always check with state and local laws and regulations as those may be more strict than the federal rules.

Please note: The following information on hiring and payroll is based on federal guidance for 100% parent-owned sole-proprietorships and partnerships only.

Owners’ children of any age can work any number of hours or time of day. If under 16, cannot do hazardous work (e.g., lawn mowers, sewing machines), work near flammable or hazardous materials, or where food is cooked.

✓ If the only employees are immediate family, owners’ children need not be paid the minimum wage—but if others are regularly employed, even family members must be paid minimum wage.

Owners’ children under 21:

✓ Wages are exempt from FUTA.

Any children under 18:

✓ If the business is 100% parent-owned, the children under 18 are exempt from FICA.

✓ If not owners’ children, obtain an age certificate recognized by the DOL and your state Wage and Hour Division (WHD). DOL often accepts state age certificates, but ask your WHD to be sure. Return it to the worker at termination.

✓ The workers may not do hazardous work.

Ages 14-15 not the owners’ children can work 8 hrs./day, 40 hrs./wk., June 1-Labor Day, between 7 a.m.-9 p.m. if school is not in session. Exceptions: Limits do not apply to news carriers or children employed exclusively by a parent/sole proprietor. For agricultural jobs, contact the DOL.

Under 14, cannot be hired unless they work for a parent/sole owner.

Federal employment-tax rules

Obtain W-4s from all summer employees, even the owners’ children, students working part-time and foreign students.

Withhold FITW from all employees, including the owner’s spouse/children, unless a W-4

claims exempt.

Withhold FICA from all employees, even high school students and those who receive

SS benefits. Exception: Employees under 18 working for sole-owner parents.

Pay overtime for hours actually worked over 40 hours in the workweek. You are not

required to include as hours worked paid time off (holidays, vacation days). Do not substitute paid nonwork hours for work hours to avoid paying at overtime rates.

Example: Eric works 12 hours a day, 4 days of the workweek. He is off the 5th day, a holiday, but is paid for 8 hours. He is correctly paid 40 hours’ straight time + 8 hours’ overtime + 8 holiday (nonwork) hours. Eric’s employer is not allowed to substitute the 8 hours’ holiday pay for Eric’s 8 hours of overtime to avoid paying the overtime rate.

Paid Holidays and Vacations

Under federal law, paid holidays for part-time and summer help are always optional, but check state laws.

No paid vacation is required—but if you provide paid vacation, some federal and state laws apply.

Benefits

Temps and part-timers. Benefits are optional, but if offered, should be explained in a written benefits plan.

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Legal Disclaimer: This post contains general information for taxpayers and should not be relied upon as the only source of authority. Taxpayers should seek professional tax advice for more information. This information was current at time of posting; we are not responsible for updating this or any blog post/article for subsequent changes in the law or its interpretation.

Originally appearing in The General Ledger Vol. 42, No. 5. Certain content on this page is copyright © 2025 American Institute of Professional Bookkeepers. All Rights Reserved for applicable content. Used with permission.