Although it may not always seem so, owning a business can provide some useful tax advantages. Prime examples--and ones that are often overlooked--are the tax benefits you receive when hiring family members to work in your business.
Getting the family involved in the business can mean solid tax savings. Not only will such a strategy help reduce the family tax bill, but it can also provide each member with some valuable nontax advantages as well.
"It's a great idea," declares Ward Bukofsky, managing partner of accounting firm Braverman, Codron & Co. in Beverly Hills, California. "Hiring family, particularly children, to work in your business allows you to move income out of a higher tax bracket into a lower one."
It also gives you the opportunity to transfer some wealth from yourself to your children without incurring federal gift or estate taxes. Keep in mind that the salary paid must be reasonable for the work done. There are some rules to follow, but complying is relatively straightforward.