Can I Hire My Spouse in My Child Care Business?
One of the benefits of owning a business is the flexibility to hire family members, including your spouse. But before you add your partner to the payroll, it’s important to understand the tax rules, legal requirements, and best practices that apply. Hiring your spouse can be a smart move for your family and your business, but it has to be done correctly.
Hiring a Spouse in a Sole Proprietorship
If you run your child care business as a sole proprietorship (not a single-member LLC), you generally have two options:
Employee Model – One spouse controls the business and the other is hired as an employee.
You’ll need a Federal Employer Identification Number (EIN).
Wages are subject to Social Security, Medicare, and income tax withholding.
You may be exempt from paying Federal Unemployment Tax (FUTA), saving about $420 annually. However, paying FUTA allows your spouse to earn Social Security credits and access benefits like a retirement plan.
Qualified Joint Venture – If both spouses materially participate in running the business, you can elect to file as a qualified joint venture.
Both spouses report income separately on Schedule C.
Each pays self-employment taxes on their share of the earnings.
This option avoids the complexity of a partnership while recognizing both spouses’ contributions.
Hiring a Spouse in an LLC or Corporation
If your business is an LLC, partnership with someone other than your spouse, or an S/C corporation, your spouse must be treated as an employee:
You’ll need an EIN and must withhold and pay all applicable employment taxes.
Your spouse will gain Social Security credits and access to benefits offered by the business.
They can also hold ownership as a member, shareholder, or partner, depending on your business structure.
Two Other Things to Keep in Mind
Fair Treatment: Pay your spouse a reasonable wage similar to what you’d pay any other employee for the same role. Keep up with all the same forms, background checks, and onboarding requirements.
Written Agreements: If your spouse is a co-owner or partner, create a clear agreement covering ownership, decision-making, profit-sharing, and what happens if the partnership ends. Having this in writing protects both your business and your relationship.
Final Thoughts
Hiring your spouse can bring financial advantages, retirement benefits, and shared commitment to your child care business. But it’s not as simple as just adding them to the payroll—different structures have different rules. By understanding the options and following best practices, you can avoid tax pitfalls and make the most of this opportunity.