When you run a small home-based business, there’s a good chance that you have a total of one employee: you. At least, this is how it’s like in the beginning when you are first starting to expand your business, but what happens when the volume gets a little bigger than you can handle?

It is perfectly viable and acceptable to hire family members and other people in your household to help you out with your business and, if you do so, you may as well take advantage of the tax incentives that can result from “writing them off” as a business expense. Note that you can’t simply “pay” your wife because it’s convenient to do so; she actually has to be doing some work for you and the rate of pay has to be reasonable.

However, by doing so, you can better distribute the income in your home to make for lower overall income tax payments. Let’s say, for example, that you earn $80,000 from your home-based business one year and your spouse made $20,000 working part-time at a regular job. You can then pay your spouse some money so that your net income is less, bumping you in a lower tax bracket, while keeping your spouse in the lower tax bracket he or she is already in. The net tax would then be lower.

If you have children of working age, hiring and paying them to perform certain tasks related to your business can be a good way to teach them responsibility. It can introduce them to the world of work in a less intimidating and more familiar environment.

What do you think? Have you hired any family members to work for you?