Why Consider Hiring Your Spouse?
Before we look at whether to hire a spouse is a good or bad thing, before you even consider hiring a husband, wife or life partner, ask yourself if they really understand the business. If your spouse is an automotive technician and your booming business is a carpet cleaning business, they may be bored and offer more harm than good.
A spouse may want to quit the drudge of their 9 to 5 job just to be a successful entrepreneur, but you must remind them they are not your business partner but an employee.
Be honest with one another first and talk about what each of you will bring to the business and what skill sets your spouse has that will benefit your company. If you find you’re both arguing about the business before you even hire your spouse, it probably won’t work out once the spouse becomes an employee.
The Pros of Hiring Your Spouse
Once you’ve agreed that bringing your spouse onboard as an employee is a good idea, here are some of the rewards:
- Daycare Tax Credits – If both of you are working and you have children, all of your daycare expenses are tax deductible. This is assuming your spouse was a stay at home caregiver.
- Travel Expenses – If your spouse is an employee and you travel for business, you can include your spouse’s travel costs as travel expenses.
- Insurance Expenses – Health and life insurance expenses for your spouse can be paid by the business. This works well for S Corporations and Limited Liability Companies even if your spouse is not a true partner on your incorporation documents.
- Education & Training – Just as you can deduct a normal employee’s training or education expenses, because your spouse is also an employee they can even continue their college education while working at the business.
- Confidentiality – Often, it’s hard to find an employee you totally trust 100% with confidential information. This can be a large benefit when hiring a spouse.
The Cons of Hiring Your Spouse
Along with the advantages of spouse hiring, there are some disadvantages to consider:
- Favoritism – If you employ other workers, and you treat your spouse more favorably than you do them, this can cause dissention in the workplace.
- Loss of Boss – Having your spouse as an employee, especially if they are unable to complete their work, often causes you to lose that boss or owner clout, because it may be considerably harder to fire them than a regular employee.
- Taking the Office Home – Spouses who work together all day tend to take “work” home with them and discussions regarding the business can turn into a 24/7 issue. This is often hard to break unless you make rules and abide by them.
- Dealing With Absenteeism – If you hire a spouse, because they are your spouse, they may take advantage by going fishing with the guys or taking a trek with the gals. You spouse’s working hours and time off should comply with rules you set for other employees. If you allow your spouse to come and go as they please, your other employees may resent this as a form of favoritism.
- When the Spouse Quits – Often when you hire a spouse they don’t feel the same sense of “I need this job,” as other employees do. They may feel excited at first and then decide to pursue another career and leave you in a bind to find a replacement quickly.
Before You Hire a Spouse
If you and your spouse believe that by hiring them you can obtain many tax credits or write off certain costs as business expenses, check with your tax professional first, as the Internal Revenue Service changes tax laws constantly, which can affect you if you hire a spouse.
Give it a trial run first to see if your spouse really will enjoy the job you give them. It may not be what they expected. Take the time to really discuss if the pros outweigh the cons and don’t use that as your only decision making process. Talk about the job, what it entails, and what you expect. It’s often a good idea to speak to your employees as well so they understand that if you hire your spouse, they will be treated as a regular employee with no favoritism.
Tax Guru (https://www.asktaxguru.com/831-seven-tax-advantages-hiring-your-spouse-your.html
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