Podcast

Episode 443

Nov 18, 2022

Could hiring your child in your massage business be a bonus or a burden? Michael and Allissa break down the benefits so you can decide if it's a good choice for you.

Listen to "E443: Benefits of Hiring Your Child in Your Massage Business" on Spreaker.
Image for E443: Benefits of Hiring Your Child in Your Massage Business

EPISODE 443

Weekly Roundup

Discussion Topic

  • Benefits of Hiring Your Child in Your Massage Business

Quick Tips

  • Find a course that you never finished and go finish it.
  • Delete your stack of courses and let it go.

Sponsors


Transcript: 

Sponsor message:

This episode is sponsored by us and our Marketing With Personality ebook. Marketing is most effective and way more fun when your message is a true reflection of you and why you love your work. Interacting with clients doesn't need to be a smarmy sales experience that leaves you feeling yucky. Genuine marketing is about sharing your message with people whose lives could be improved by the service you provide. It's all about connecting with the people you want to serve, people. We have a great ebook about how to learn to build your business on your strengths and grow a clientele you truly enjoy, and you can get it for free at massagebusinessblueprint.com/personality. Check it out.

Hey, everyone. Welcome to the Massage Business Blueprint podcast where we help you attract more clients, make more money, and improve your quality of life. This right here is Allissa Haines.

Michael Reynolds:

This right here is Michael Reynolds.

Allissa Haines:

And we are feeling perky this morning. Well, I am.

Michael Reynolds:

Yeah, I could get perky.

Allissa Haines:

That's all I got.

Michael Reynolds:

I could be on the perky train. Andrew is saying good morning. Andrew, you are always bright and early. First one to say good morning. We appreciate that. Welcome, Andrew.

Allissa Haines:

Yeah, thank you. I hadn't opened the little chat thingy yet, so I hadn't seen that. Even though I'm supposed to, because that's my job.

Michael Reynolds:

That's all right. Whoever gets to it, gets to it. No worries.

Allissa Haines:

Michael, what are you reading?

Michael Reynolds:

I am reading the latest newsletter from Chris Brogan, who we've talked about a lot in this show. Chris Brogan is an author, a business coach currently. He is a team member at a software company. The name escapes me at the moment, Appfire, I believe, and someone Allissa and I have followed and respected for a while. He usually has some smart things to say and his newsletter's really good. The latest one is called "When In Doubt, Do Something". I feel like this is a theme we've brought up recently a lot, and I like the theme so I'm going to bring it up again. But his newsletter aligned with that theme of, if you're stuck, if you're not sure what to do, do something. He goes on in the newsletter to really reassure us by saying things like, "Hey, you know what? Nothing is really irreversible," generally in business and mostly in life, but in this case, it was business context.

If you act on something and you change your mind or it doesn't work out, most things are not permanent or irreversible. You can change course, you can figure it out, you can fix things, you can do something different. But the act of doing something moves you forward, where if you're in paralysis and scared to do anything, you're not going to go in any direction at all. It was a good newsletter. I'm not posting it anywhere because he likes his newsletters to be private. He doesn't like them to be public. If you want a copy of it, let me know. Email podcast@massagebusinessblueprint.com, and I will forward it to you and encourage you to subscribe as well. What about you?

Allissa Haines:

Excellent, thank you. Yeah. Sorry, I'm flipping screens now. That's why I'm...

Michael Reynolds:

You got a cool site to share.

Allissa Haines:

I do. I have a couple cool sites to share. Pardon me. I think we've probably mentioned in various places, but my ex-husband was very sick and he passed away last week. I am the executor... In Massachusetts, it's called the personal representative of his estate. One, I know we've talked about getting your crap together so that if something happens to you, things are so much easier on your loved ones. Part of, I think... We put that topic on our list and then all of these things happened that made it extremely relevant to both of us. I am extremely fortunate that we had warning and that I sat down with him a couple months ago and we made a list of his accounts and I put all of his passwords into last pass. Thank goodness, my stepdaughter was able to get into his phone because that was the only password that I didn't have yet and she knew the phone password. We were able to get into that, which meant we could access his email, because, actually, that was the second password I hadn't gotten yet.

Because I have that list and because I have access to his email, everything has been easier. I have been able to shut off every subscription that would've been withdrawing from his account. I stopped every auto renewal that could happen. It is so much less hassle versus having to make all these phone calls to get refunds and stuff. In the process of all of this in the past several days, I've also spoken with a lawyer and what it takes to execute an estate. I knew it was a lot, but holy wow, was it a lot. They say it can be 500 to 800 hours of work over a year or two just to follow through on someone's wishes, and this is with a will.

Interesting stuff, and I think something that we should all be prepared for. If there's anyone that you could end up next of kin-ing for, it's worth it to, one, make sure you have all of this information together, which I know isn't always possible if you're dealing with a family member who is just simply not willing to do that, but even just knowing a little bit about the laws in your state and what has to happen.

I would've messed up a whole bunch of things if I hadn't done a lot of reading while I was sitting there in the hospital room. Executor.org is a fantastic resource. I also learned that there's really affordable software, and by affordable I mean a hundred bucks, that will customize everything for your state, walk you through a checklist, a place where you can track all of the expenses that you might pay for the estate, because you got to give a list of that to the court. All kinds of things like that. I'm going to put the couple that I have referenced in the notes, and if you're just weird and morbid and into this kind of stuff like I am, it's fascinating to read about. If you know will be the executor of someone's estate, get prepared, because it's fascinating and it's interesting and I also cannot imagine how horrible this would be if we didn't have things in place on top of all of this grief.

That is what I'm reading and my message to everyone this week. If you think it's something you're going to have to deal with in any way, learn about it. Okay. That's it.

Michael Reynolds:

Yeah. Trust and Will also recently added probate services to their lineup. Trust and Will's online and they have a probate product you can buy. Basically, three levels where it's DIY, collaboration or totally managed for you by an attorney. That's also one resource I'd like to reference.

Allissa Haines:

I feel so fortunate that we already had... He had a family attorney already that handled his dad's estate, because we were just in the middle of settling some stuff from his dad's estate, which is now... Literally, we were supposed to go Friday and sign it all and that was when he was in the hospital, so we couldn't. Now, we have to wait for me to have the authority to sign off on things from [inaudible 00:07:25]. I am so grateful we have an attorney for this. I also know I will not need an attorney for the entirety of handling his estate once we get that other stuff handled. Yeah, I'm going to put the Trust and Will in the podcast notes. There's one other that I can't think of right now because I have a lot of brain fog, but I'll put it in there because it was helpful when I can come back to it. Okay.

Michael Reynolds:

All right. How about our next sponsor, our friends at ABMP?

Allissa Haines:

Yes. Let's talk about ABMP. Let's talk about the apps.

Michael Reynolds:

I was thinking the apps.

Allissa Haines:

Yay! I use them all the time, man, for real. There's two apps. There's ABMP Five Minute Muscles, and there's ABMP Pocket Pathology. They are quick reference apps designed to help you quickly find info that you need to plan a session either in advance or right on the spot and you can also use to refresh your knowledge of muscles and pathology. Let's see, Five Minute Muscles includes muscle specific technique and palpation videos for the 83 most often addressed by professional massage therapists. Sorry, I lost my place. It's great because the technology they use doesn't take up a ton of space on your phone or your device. These apps are included with ABMP membership, rock on. If you are not an ABMP member and you want to check out the sample demos, you can do that. Everyone can learn more at abmp.com/apps.

Michael Reynolds:

All right.

Allissa Haines:

Okay.

Michael Reynolds:

We got a fun topic today in my opinion.

Allissa Haines:

Yeah, man. I just get to hit mute and let you handle it. Michael, tell us all about the benefits of hiring your child in your massage business.

Michael Reynolds:

I will tell you, and first let me preface this by saying this is not tax, financial or legal advice. This is an educational broad discussion. When it comes to the specifics of if this is right for you, talk to a professional. This is strictly educational. I got to put that disclaimer out there as well. Before I get started, Leslie has a timely comment I want to pop in there first. She says, "I'm the middle of setting up. The ABMP edition of Pocket Suite has been a pretty neat experience and great benefits." There's another app that's a benefit, not from ABMP, but a partnership with ABMP. Thanks, Leslie.

Allissa Haines:

Once again, I totally forgot to see the comments. My bad.

Michael Reynolds:

No worries. It popped in just now. I just saw it right now. All right, so benefits of hiring your child in your massage business. This is an interesting topic because many massage therapists have children and have often thought about, "Hey, if I could put my kid to work and do laundry or cleaning, or if they're older, maybe doing social media marketing or something, that'd be pretty cool. How's that work? Is it a good idea?", and all this stuff. I'm going to talk through some of this stuff, and again, some of the details, you're going to have to talk to your professional financial person about that. But generally, here's how it works. First of all, just be aware, labor laws generally restrict children under 14 from being employed. This is state by state, but generally, there are age restrictions on minors and how they can be employed, if they can be employed. At certain ages, there are certain limitations. That's the default landscape.

However, there is a broad exemption to the child labor laws for young children employed in businesses owned solely by their parents. If it's your child, they technically can be employed at any age and any number of hours. That's a nice exemption that opens up this possibility for many solo massage practices that have children that could be employed. Again, no restrictions as long as the parent-owned business is not involved in hazardous work, which would not apply for massage therapists. This is not hazardous work. We're talking mining or manufacturing or something like that. What are some of the benefits of hiring your child and how does it all work? One benefit is it allows you to shift income to your child tax-free.

The reason it's tax-free is because minor children can earn up to the standard deduction and pay no federal income taxes. For the most part in many situations, they're also exempt from FICA taxes, which are those payroll taxes for Medicare, social security, et cetera, if your practice is a sole proprietorship or LLC. If you're an S corp, you don't get this FICA exemption. But if you are a sole proprietorship or LLC, in most cases, again, it always depends, but in most cases, your child can be paid tax-free and no payroll taxes as well. It's a way of shifting income to your child tax-free. It also lowers your business taxable income, so this is an expense in your business. You're able to write that off, so to speak. That phrase write off is always so funny to me. It's an expense you're deducting from your business, but some people see it as, "Hey, it's a write off."

You're deducting, you're lowering your taxable income, and that, again, allows you to shift that income tax free to your child. Should you do W2 versus 1099? I like to bring this up. There're some nuances here I'm not going to get into today necessarily, but so many small business owners, and especially massage therapists, I've noticed we jumped straight to 1099. We're like, independent contractor is easier so we just do that. I want to caution you. Generally, it's probably, in many cases, going to be preferred to pay them as a regular W2 employee. It avoids the self-employment taxes that they could pay if they make over a certain amount. Also, it avoids the risk of misclassification. We've talked in previous episodes about this. If you pay someone as a 1099 contractor, you're supposed to treat them like a contractor. There's lots of rules around that.

For those who are listening via audio, Allissa is trying to fix her camera by sticking her nose in the camera and it's hilarious. Go watch the video if you want to see it. If you are paying someone as a contractor, you're supposed to treat them like a contractor, which means that you can't control when they work, how they do their job, what they wear to the office, uniforms, things like that. If you're hiring your child, you're probably treating them like an employee. You're probably telling them when to work, what to do. You're having a high level of control over them. In theory, you really should be paying them as an employee. Keep that in mind. Like many things, all of this is subject to what can stand up under scrutiny if you get audited by the IRS, so just keep that in mind.

Some other cool benefits of hiring a child is the child can fund things like a Roth IRA because they now have earned income. Roth IRA is a retirement account we've talked about in the past here. You put after-tax money into it that grows tax-free and is withdrawn tax-free at retirement. It's a really cool tax advantage account. Obviously, depending on what's invested inside of it is how it grows, that's up to you to invest inside of it, but the account itself has tremendous tax benefits, especially for younger people because they have lots and lots of time for that money to grow tax-free. They could conceivably have this massive base of tax-free income later on. The caveat is you have to have earned income to contribute to a Roth IRA. Now that you're hiring your child and they're making money, they have earned income. They can contribute to a Roth IRA.

It's got to be a custodial account. Generally, if you're under 18, you can't directly open an account like this. You have to have a custodial account, which is pretty easy. The parent opens the custodial account for the child and it's in their name, but you're the custodian for the account. That's fairly easy to work out. They can fund up to the amount of their earned income or the annual contribution limits, whichever is less. In 2022, the annual contribution limits for a Roth IRA, for example, is $6,000 a year. It's going up next year, but for this year, it's 6,000. If they make, let's say, $10,000 in earned income working in your business, they can contribute $6,000. If they make $3,000 working in your business, they can contribute $3,000. That's how it would work. Again, assuming the Roth IRAs invested aggressively and appropriately, this can have a substantial impact on the child's future.

For instance, if you, for example, just contributed the maximum $6,000 contribution to the child's Roth IRA each year from age 15 to 17, which is three years of contributions, and then nothing else, by the time that child reaches age 65, they'll have almost half a million dollars in tax-free retirement money, assuming a 7% rate of return. Pretty powerful stuff. That time horizon is pretty powerful. You can really set your child up for an incredible success by doing this. Keep in mind, the child doesn't have to contribute that earned money to the Roth IRA. They just have to qualify for the amount by earning that much. But then, you can gift them the contribution. For example, hypothetically, if you want to pay your child the money for working in your business, let them keep the money for whatever they want to use it for. And then, you contribute additional money to their Roth IRA for them. You can do that as long as they're eligible based on what they've earned.

That's pretty cool. This also subject to gift tax rules. If you haven't exhausted your gift tax rules, that's going to play a part. Again, that's one of those nuanced things, talk to a pro about, but just be aware. There are some guidelines to doing this appropriately. The most important guideline is a child must be hired for real age appropriate work in your business. For example, things like clerical work, answering the phone, data entry, cleaning, doing laundry, social media marketing, maybe if they're older and savvy on this stuff. You have to make sure it's a legitimate true role in your business that is real work. You can't just say, "Hey, I'm hiring my child. He's going to work 10 hours a week in my business," and they just sit around playing video games and you just call it a payroll.

No, you can't do that. I mean, you can, but if you get audited, it's going to be tough to justify. You're going to be in a pickle. They have to be doing real work. Also, wages must be reasonable for the job. Not too low and not too high. Not too high is where people get into trouble a lot of times. What that means is if you are hiring your child to do laundry in your massage practice and you pay them a hundred dollars an hour, I'll use an extreme example, that's not going to fly. If you get audited, that's going to be very difficult to justify, because you wouldn't pay any other person a hundred dollars an hour. That's clearly just a way of shifting lots of extra income to your child. By contrast though, if you know your child's doing, let's say, social media marketing, let's say they're a teenager, really savvy on Instagram, they're doing social media marketing, you might conceivably pay a social media manager $40 to $50 an hour. That could be reasonable. You want to make sure it's reasonable based on the work being done.

Ideally, you want to pay, again, through a payroll system, through direct deposit, some way you can track it. You should not pay in property. I don't think this comes up a lot, but one of the guidelines is that if you pay in property... There was a story I came across where a woman paid her daughter in pizza for working at her business. She literally paid in pizza and there was some controversy around it. The reason you don't want to do this is because that can be conflated with general parental support. Just to be clean about it, pay in real money, document it, track hours like you would any other employee. If your child works 10 hours a week in your business, have them clock in and clock out or document the hours in a spreadsheet or a form. Just treat that child like a regular employee, like any other.

Bottom line, in addition to teaching your child responsibility, which is a great thing, hiring your child can be a really good way to lower your income and shift that income to your child tax-free and get them a jump start on investing potentially with things like a Roth IRA. And then, again, that lowers your taxable income in the process. That's a rundown on how it works. I'm hoping that gives you some guidelines and some ideas on how you might look at potentially hiring your child in the business as well if that's appropriate.

Allissa Haines:

We've got a question from Leslie. I'm not going to put it on the screen yet, because then I won't be able to read the full thing. "Is there a possible consequence to their kids' college financial aid? Or can you sidestep that by setting up a Roth IRA for them and making it go to there? Does hiring your child wreck your solo 401k? Pick any of these questions. Pretend I'm asking my financial advisor, Michael.{

Michael Reynolds:

That's a great question. Having money in a Roth IRA does slightly affect financial aid, but I think it's only by 3% or so. The percentage difference between the way the assets are treated versus parent and child assets, I guess... Bottom line, it doesn't affect it that much. It's a few percentage points. Yes, it does affect it slightly, but not enough to be significant. I don't know the answer to the solo 401k. I believe it would cause problems because you are technically... Actually, I'm sorry. Let me take that back. No, I believe it would not, because you have to... If you keep your part-time employees under a certain number of hours, I believe it's a thousand hours at the current guidelines, then you don't have to... They will not disrupt your ability to have a solo 401k. I'm making the assumption that your child's probably not working a thousand hours in your business. As long as they're under that guideline, that would not disqualify you from having a solo 401k. Those are great questions.

Allissa Haines:

Andrew had a comment, "I feel as long as your income is still under 127K a year, you should qualify." I don't know.

Michael Reynolds:

I'm not clear on what that refers to, Andrew. I'm sorry. Let us know if you have follow-up on that.

Allissa Haines:

It's tricky stuff. It's always a good idea to consult a professional.

Michael Reynolds:

Yeah. Again, this is educational discussion just for awareness. Definitely talk to your tax, financial or legal pro on that. [inaudible 00:21:43]

Yeah, you might be right. I'm not sure. You might be right, Andrew. Yeah.

Allissa Haines:

Good to know. Okay, this was thorough. Thank you, Michael.

Michael Reynolds:

Yeah, fun stuff.

Allissa Haines:

I so wish that I had legal kids that I could pay to do my laundry. Because right now, I'm just paying cash on occasion because they're not my legal kids and I cannot legally employ them. That's a bummer. But there it is. Yeah, thank you. Anything else to add, Michael? Are we good

Michael Reynolds:

No, I think we're good. Any questions, just email podcast@massagebusinessblueprint.com. If I don't know the answer, I will try to find it for you because some of the stuff is nuanced, so feel free to reach out, but that's it for me.

Allissa Haines:

All right. Let's jump to our next sponsor who is The Original Jojoba Company. You know how I feel about this. We should be using only the highest quality products. It's going into our bodies, it's going into our client's bodies. I like Jojoba because it's non-allergenic, so it's safe. I can use it on any client and I can use it on every client without being concerned about an allergic reaction. I'm going to go a little bit off script. I'm going to say when you learn to use a high quality product like Jojoba, you use far, far less of it.

You can use a little more if you want a lot of slip and slide. You can use barely any. I'm talking a drop for a forearm. If you want a little bit of glide, but mostly traction. It's good for every kind of work. If someone told you can't use an "oil" for your work, you can. Jojoba is not actually an oil. It's a wax ester, but it's a liquid. If that has been turning you off, maybe you need to give it a shot. You can get 20% off the price of the product when you shop through our link, massagebusinessblueprint.com/jojoba.

Michael Reynolds:

Thanks, Jojoba.

Allissa Haines:

Thank you so much, Jojoba. You're always just the best. Michael, you go with your quick tip first.

Michael Reynolds:

Yeah. My quick tip is find a course that you've never finished and go finish it. I was just thinking about this recently. I've got a couple courses sitting on my desktop that I've done halfway through and I'm like, "Yeah, I could go get some more courses because I'm interested in learning some stuff," and I'm like, "Wait a minute, I've already paid for these courses. I still want to learn the stuff. It's sitting here on my desktop. Why don't I just go finish it?" I am betting that there are quite a few out there listening that have bought a course, maybe it's an online business course or something, maybe you've joined our community and haven't taken our courses in the community, maybe you started them and didn't finish it, whatever it may be, there's probably a course out there that you've paid for and you haven't finished. I say go finish it. Knock that off your list and you'll be happy that you used the thing you paid for and you'll learn some stuff. That's my quick tip.

Allissa Haines:

My quick tip is if you know you're never going to do that, just find that course material if you've got it stored on your computer or the emails are still sitting at the bottom of your inbox at the bottom of 21,000 emails, just freaking delete it. Just let it go.

Michael Reynolds:

I also love that.

Allissa Haines:

Delete it. Never think about it again. It is a sunk cost and it is okay to not spend any more time or energy being concerned about it. Let it go. Andrew has noted in the comments, "You could also check out the ABMPCE library." You could say, "I am just going to let go of all these other courses that I never really finished because they didn't engage me enough, and I'm going to go to abmp.com/learn, I think. Because I'm an ABMP member, this is all free to me anyway. I'm going to pick one that I actually want to do." I'm going to say, if you've got anything hanging out on your computer, in your brain, in your inbox that you're supposed to complete and you're not going to, just delete it. Let it go. It's okay. It's okay. Remember when we saw Ariana Huffington do a keynote? It was at the first inbound we went to.

She was like... It was something about checking things off your to-do list and also just eliminating the few things you know you're going to do. She was like, "I'm never going to learn to ski. I'm taking it off my list. I thought I wanted to at one point. It always stayed on my list. I'm never going to learn how to skii." I am never going to learn how to speak Italian. I'm just not going to, and I need to stop thinking it's something I'm going to do. I am, however, going to try French again. Take it out of your brain. Let it go.

Michael Reynolds:

I love that, the yin and the yang.

Allissa Haines:

Yeah.

Michael Reynolds:

I love it. Either finish it or delete it.

Allissa Haines:

Just let it go, man. Okay, that's everything, I think. Thank you so much for joining us. If you've got a topic you want us to cover, you can email us at podcast@massagebusinessblueprint.com. We love your emails. Love them, love them, absolutely love them. I love hearing about your businesses. I like hearing what's going on and what you're going through.

Feel free to email us. Again, podcast@massagebusinessblueprint.com. You can also go to massagebusinessblueprint.com to find a whole bunch of blog posts, our whole podcast archive, a bunch of free resources. That's everything I want you to know. I hope you have a really good day.

Michael Reynolds:

Thanks.

Logo for Happyface
Logo for ABMP
Logo for Jojoba
Logo for Pure Pro Massage Products