Family

Family-run businesses are part of the backbone of the American economy. Whether you are starting out or running an established business, it’s natural to lean on relatives. You know their work ethic and communication style, and they care about your success. But mixing family and business requires balance. The same closeness that makes relatives trustworthy can also make boundaries harder to maintain.

The upsides — and a few tax breaks

Hiring family can strengthen both your business and your relationships. You spend more time together, enjoy built-in loyalty and build a public image rooted in family values. These qualities often resonate with customers who like supporting local, family-owned enterprises.

Hiring family can also simplify staffing: There’s no long recruiting process and no worrying about cultural fit. Further, there may be tax advantages. You don’t have to withhold Federal Unemployment Tax Act taxes if you employ a spouse, a parent or a child under 21. You also don’t have to withhold Federal Insurance Contributions Act taxes (Social Security and Medicare) if the business is 100% family owned. These exemptions, however, don’t apply if your company is legally structured as a corporation or partnership.

Where complications can arise

Working with family members can blur the lines between home and office. It’s important to communicate expectations clearly from the start and to hold family employees to the same standards as nonfamily workers. Unequal treatment or special privileges can erode morale and lead to resentment among the staff.

Similarly, you need to be able to stay objective when evaluating a relative’s performance. If you have other employees, how will they understand having your relatives as work colleagues? And if a family member isn’t a good fit, are you prepared to have that conversation professionally and on good terms?

You’ll also need to stay compliant with employment laws. Under the Fair Labor Standards Act, minors under 14 generally cannot work for a business (limited exemptions include newspaper delivery, babysitting and acting). Many states also require minors to have work permits, limit their weekly hours, and be guaranteed specific breaks and mealtimes.

Keeping both relationships and the business strong

When family works together, it’s important to avoid bringing personal disagreements into work. Similarly, don’t let workplace frustrations spill into family time. Establish clear roles, including regarding who manages whom, who makes which decisions, and where home life ends and business begins.

If your business involves in-laws, blended families or plans to pass ownership to the next generation, it’s wise to think ahead about potential conflicts, especially financial ones. Prenuptial or shareholder agreements can clarify ownership stakes and prevent misunderstandings later; discuss these early and handle them with care.

A family business can be a powerful way to share values, build wealth and strengthen ties across generations. By setting professional boundaries, communicating openly and applying the same standards to family that you’d apply to any employee, you can protect your company and your relationships, and keep your family enterprise thriving.

© YC Partners 2025