Can I Be a Sole Proprietor and Have Employees?
Can I Be a Sole Proprietor and Have Employees?
Yes! As the sole proprietor, you can hire employees but are fully responsible for all business facilities. It’s because, as the sole proprietor, you have no legal separation between you and your business.
In addition, you’ll need to obtain an EIN (Employer Identification Number) from the IRS, follow payroll tax regulations, and provide workers’ compensation if your state requires it. For instance, if you have a food truck, you can still hire a team to help you.
Can You Hire Spouse and Kid as Employees?
If you’re running a sole proprietorship and thinking, “Can I actually put my spouse or kid on payroll?”—the short answer is yes. In fact, many solo business owners start bringing in family members as things grow and they need extra help. But just because it’s family doesn’t mean you can skip the legal and tax rules.
Let’s start with your spouse. If they’re helping and working under your direction, they’re considered employees—not co-owners. That means you can pay them a real wage or even tax-free perks like a health reimbursement account. Just be sure their compensation is fair and they’re doing actual work.
You’ll also need to withhold Medicare and Social Security taxes and issue them a W-2. Bonus: they’re not subject to federal unemployment tax (FUTA), which is a nice break.
Now, what about hiring your kids? That’s allowed too, with a few conditions. They need to be doing real work (not just hanging around the office), and you have to follow child labor laws. That means no dangerous equipment or late-night hours for minors, and some states may require work permits.
But there are some major tax perks: if your child is under 18, you don’t have to withhold FICA taxes, and their wages may be completely tax-free if they earn under the standard deduction.
The bottom line is that family can absolutely be part of your business team. Just ensure you’re treating them like you would any other employee regarding documentation, taxes, and duties.
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