How to pay your own child from your business
By Terry Rice · Published September 8, 2026 · Last reviewed September 8, 2026
We are a family that did this, not accountants or lawyers. Rules vary by state and change. Every claim here links to the source so you can check it yourself.
If you run a sole proprietorship, wages you pay your own child under 18 are not subject to Social Security or Medicare tax, and are not subject to federal unemployment tax until they turn 21. Income tax withholding still applies. This treatment does not survive if the business is a corporation or a partnership that includes a non-parent.
The four pieces
01 · The business
You, as a sole proprietor
The simplest structure and the one with the best tax treatment here. Not an LLC taxed as a corporation, not an S-corp. Those break the treatment described above.
02 · The account
The customer pays your business
Your name, your account, kept separate from your personal banking. Your child's name can appear on a Stripe account from 13 with you attached, but the business account is yours.
03 · The paycheck
You pay your child real wages
The IRS is explicit. Wages paid to your own child under 18 in a parent-owned sole proprietorship carry no Social Security or Medicare tax, and no federal unemployment tax under 21. Income tax withholding still applies.
04 · The card
It lands on their debit card
Your child is now an employee with an employer, so the wages can be direct deposited into a kids' banking app the way any job would. Direct deposit usually starts at 13; younger kids use a custodial account.
The treatment above comes straight from IRS Family Help.
Why this beats the version people try first
If the child is treated as self-employed instead, self-employment tax applies from $400 of net profit with no age exemption. A nine-year-old with $400 of net profit owes it. As an employee of a parent's sole proprietorship, wages usually fall under the child's own standard deduction, described in IRS Publication 929, and carry no payroll tax. The more cautious-sounding structure is the one that leaves more money with the child.
The work has to be real
The child has to actually do the work, the pay has to be reasonable for that work, and you should keep a plain record of what they did and what they were paid. Do not pay a child for work they did not do.
Three ways families get this wrong
| Don't | Why | Instead |
|---|---|---|
| Venmo | Teen accounts explicitly forbid receiving payment for goods and services, and teens cannot hold a business profile. Using it this way can get the account frozen. | A business account in the parent's name, with a real processor. |
| A kids' card as the business account | These cards are not built for business use and the agreements say so. It also mixes your customer's money with your kid's allowance. | Business account for revenue. The kid's card receives wages only. |
| Assuming your state matches federal law | Federal rules let a child of any age work in a business their parents fully own. Some states, including New York, are stricter for children under 14. | Read your state labor department's page before your kid does paid work. |
We are describing what our family does. Ask an accountant once, early, while the numbers are small. That conversation is cheaper than the one you have three years later.