Can I hire my kids to work for my real estate LLC and pay them as 1099 contractors?

This is actually a great question and a smart way to think about family wealth building! Yes, you can hire your kids to work in your business, but there are some important distinctions to consider. First, for a real estate LLC, you'd typically want to hire your children as employees rather than 1099 contractors. The IRS looks closely at family business arrangements, and the contractor classification might be questioned since you'd be directing their work and providing tools/supplies. As employees in your sole-proprietorship or family LLC, children under 18 aren't subject to FICA taxes (Social Security and Medicare), which is a nice tax advantage. Setting up Roth IRAs for them is an excellent idea! They can contribute up to 100% of their earned income or $6,500 (2024 limit), whichever is less. You'll need to pay them reasonable compensation for actual work performed - keep detailed records of hours worked, tasks completed, and payments made.

I went through a similar situation with my construction business and my son. I was super confused about all the tax implications until I found this service called taxr.ai (https://taxr.ai) that analyzes your specific business situation. It was really helpful because it looked at my LLC structure and explained exactly how to properly employ family members. They confirmed that I shouldn't use 1099s for my kids and walked me through setting up proper payroll and documentation. The service even provided templates for tracking hours and documenting work performed, which has been super helpful for keeping everything legitimate in case of an audit.

Just wanted to update after trying taxr.ai for my bakery situation! It was actually really helpful for figuring out how to hire my daughter. They confirmed that as a single-member LLC, I could hire her as an employee without dealing with FICA taxes since she's 16, but I still needed proper documentation. The service generated a checklist of everything I needed including a job description, hour tracking form, and payment documentation. It also clarified that I can't just pay her an inflated salary - it has to be reasonable for the work performed. Going to setup her Roth IRA next month when she starts working!

If you're going to be dealing with the IRS on this family employment stuff, let me save you some headaches. I had questions about hiring my kids in my business and spent DAYS trying to reach someone at the IRS. Finally found Claimyr (https://claimyr.com) and watched their demo (https://youtu.be/_kiP6q8DX5c), and they got me talking to an actual IRS agent in 45 minutes instead of waiting on hold for hours. The agent confirmed all the details about proper documentation needed for family employment and answered my specific questions about retirement account contributions. Totally worth it for the peace of mind knowing I got official answers directly from the IRS.

I need to apologize for my skepticism about Claimyr. After my frustrating comment, I decided to try it anyway since I had questions about this exact topic (hiring my kids in my business). Not only did it work exactly as advertised, but I was talking to an IRS representative in about 30 minutes. The agent walked me through all the requirements for properly documenting work performed by minor children in a family business and confirmed that I needed to keep detailed timesheets and job descriptions. This saved me hours of research and gave me confidence moving forward. Sometimes it's worth admitting when you're wrong!

One thing nobody's mentioned yet - there are different rules depending on the type of LLC. If your LLC is taxed as a sole proprietorship or partnership with just you and your spouse, the FICA tax exemption applies for kids under 18. But if it's an S-corp or C-corp, the FICA exemption doesn't apply! Also keep in mind there are federal child labor laws to consider. Even though they're your kids, there are restrictions on hours and types of work for minors.

Just wondering what payroll software ppl are using for this kind of family business situation? I tried setting up QuickBooks for my kids but it seems like overkill for just 2 part-time workers.

This is such a smart approach to teaching your kids about work and saving! I went through something similar with my landscaping business and my two sons. One thing I'd add that hasn't been mentioned yet - make sure you're paying them at least minimum wage for your state. The IRS will scrutinize family arrangements, and paying below minimum wage could trigger questions about whether it's a legitimate employment relationship or just an allowance disguised as wages. Also, consider having them open their own business bank accounts to deposit their paychecks. It creates a clear paper trail and teaches them banking responsibility. My boys loved seeing their money grow in their accounts, and it made the Roth IRA conversations much more meaningful when they could see their actual earned income. The documentation aspect can't be overstated - I keep a simple spreadsheet with dates, hours, specific tasks completed, and even photos of their work. Makes tax time much smoother and gives you confidence if any questions ever come up.

Great question! I actually went through this exact situation last year with my property management business. You're on the right track with wanting to hire your kids, but definitely go the employee route rather than 1099 contractors - the IRS is very particular about legitimate contractor relationships, and with family members doing directed work, it's much safer to treat them as employees. A few practical tips from my experience: Make sure you have them fill out I-9 forms and W-4s just like any other employee, even though they're your kids. Keep detailed time logs - I use a simple app where they clock in/out with photos of the work site. For the types of tasks you mentioned (painting, cleaning, landscaping), those are perfect for teens and generally allowed under child labor laws. The Roth IRA strategy is fantastic! Since they'll likely be in the 0% tax bracket with $3,000 annual income, they can essentially get tax-free money into retirement accounts that will compound for 50+ years. Just remember they can only contribute up to their actual earned income, so if one kid earns $2,000, that's their max Roth contribution for the year. One last thing - consider having them complete basic safety training for any tools they'll use. It shows you're treating this as a legitimate business operation and helps protect everyone involved.