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Distributors can save money on taxes by hiring their children and spouses. By hiring your children you can deduct their salary as a business expense and, because the child is employed by his or her parent, you’re not responsible for withholding social security and federal unemployment tax on the child’s wages.

Here are some limitations to this arrangment:

1. The salary must be reasonable to the child’s age and work performed. For example, you wouldn’t pay your seven year old $30 an hour.

2. The work performed must be necessary and required service to your business operations. No lawn mowing or dish washing.

3. The child must actually perform the work.

4. Document the hours and tasks your child performs in case you are even audited.

5. An actual payment must be made to the child, preferably from your business account. Be sure to check specifics with your tax adviser.