Hiring Your Kids to Work in Your Business (Oregon edition): What’s Smart, What’s Legal, and What’s Different for S-Corps vs. Sole Props/Single-Member LLCs

Hiring your minor children can be a win-win: kids learn real skills, you get real help, and—done correctly—you may capture legitimate tax savings. Below is a concise, practical guide for Oregon business owners, with side-by-side tax treatment for S-corporations vs sole proprietors/single-member LLCs, plus the key Oregon child-labor rules for kids under 16.

This is education—not legal advice. The rules are technical; when in doubt, loop in your tax advisor and attorney.

Federal tax basics: S-corp vs. sole prop/single-member LLC

Sole proprietor or single-member LLC taxed as a sole prop

If you (or a partnership in which both partners are the child’s parents) employ your child:

• Income tax withholding: Still applies. Your child completes a W-4 like any other employee. IRS+1

• Social Security & Medicare (FICA): Not owed on your child’s wages until they turn 18. IRS+1

• FUTA (federal unemployment): Not owed on their wages until they turn 21. IRS+1

These exemptions are why employing kids is most tax-efficient in a sole prop/husband-wife partnership setup.

S-corporation (or C-corp)

Your corporation is a separate employer. Wages to your child are treated like any other employee’s:

• FICA & FUTA apply regardless of age (no family exemption within a corporation). IRS+1

• This often eliminates the big payroll-tax edge you’d have as a sole prop. scorporationsexplained.com

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Either way: Wages must be ordinary, necessary, and reasonable for actual work performed.

Compliance checklist (applies to both structures)

• Real job + reasonable pay: Duties must be bona fide; pay should match what you’d pay a non-family teen for the same work (documentation matters).

• W-4 & payroll withholding: Every employee completes Form W-4; you withhold/ remit as required. IRS

• I-9 employment verification: All employees complete Form I-9. For minors without typical List B ID, a parent/guardian can establish identity 

• Timekeeping & records: Keep job descriptions, schedules, and wage records—especially important for minors. Oregon requires child-labor records be preserved and available. OregonLaws

Oregon child-labor rules: under-16 essentials

Employment Certificate (employer permit):Oregon does not issue individual work permits to minors. Instead, employers must obtain a BOLI Employment Certificate before hiring anyone under 18; you’ll list expected duties/equipment and keep BOLI’s summary of rules handy. OregonOregonLaws

Hours limits for ages 14–15 (non-agricultural):When school is not in session: up to 8 hours/day, 40 hours/week;When school is in session: up to 3 hours/day, 18 hours/week;Work hours limited to 7 a.m.–7 p.m. (can work until 9 p.m. from June 1–Labor Day). OregonLaws

BOLI can allow parent-employers to extend work to 9 p.m. (outside summer) via special permit if it won’t harm the child’s health/education and the parent supervises. Core daily/weekly caps still apply. OregonLaws

Breaks & meals (all minors):

• At least a 15-minute paid rest break every 4 hours worked.

• A 30-minute meal period on shifts of 6+ hours; the usual exemption available to some adults doesn’t apply to minors under 16. OregonLaws

Minimum wage:Minors must be paid at least Oregon’s applicable minimum wage. As of July 1, 2025–June 30, 2026: $16.30 (Portland metro), $15.05 (standard counties), $14.05 (non-urban counties). Check your worksite’s zone. Oregon

Prohibited/hazardous work:Oregon adopts federal hazardous occupation bans for minors (with additional state rules). Under 18s are barred from certain dangerous jobs (e.g., many power-driven machines, some roofing/excavation; explosives outright). Under 16s face even stricter prohibitions. Review OAR 839-021-0097/-0102/-0104/-0106 before assigning tasks. OregonLaws+1

Practical examples

• 14-year-old doing clerical/marketing work for a sole prop:Pay market-rate hourly wage, run payroll, no FICA/FUTA; cap hours per Oregon rules; secure Employment Certificate; provide breaks; avoid prohibited tasks; keep records. IRSOregonLaws+1Oregon

• 15-year-old helping in an S-corp retail shop:All normal payroll taxes apply; hours must follow the 14–15 limits; Employment Certificate required; ensure tasks aren’t on the prohibited list. IRSOregonLaws+1Oregon

Pro tips to keep it clean (and beneficial)

1. Document everything. Job description, timesheets signed by the child and a supervisor, and periodic performance notes. Oregon requires record retention and availability. OregonLaws

2. Set a real pay rate. Benchmark to local teen wages for similar work; avoid round-number “allowances.” (General IRS reasonableness.)

3. Consider a Roth IRA for your working child. If they have earned income, they may contribute up to the annual limit—great long-term compounding (general strategy; confirm with your advisor).

4. Mind school nights. Under-16s are tightly capped during the school year and have curfewed hours even in summer. OregonLaws

5. Update annually. Minimum wage zones can change each July; renew your BOLI Employment Certificate and “Notice of Change” if duties/locations change. OregonOregonLaws

Quick reference (Oregon; non-agricultural)

• Employer certificate required to hire any minor (under 18). Oregon

• Ages 14–15: 3 hrs/day & 18 hrs/week when school is in; 8 hrs/day & 40 hrs/week when out; 7 a.m.–7 p.m. (to 9 p.m. June 1–Labor Day). OregonLaws

• Breaks: 15-min rest each 4 hours; 30-min meal on 6+ hour shifts; stricter for <16. OregonLaws

• Hazardous/prohibited work: Follow OAR & federal lists (extra strict under 16; explosives always out). OregonLaws+1

• Minimum wage: Pay the correct zone rate (2025–26: $16.30 Portland metro; $15.05 standard; $14.05 non-urban). Oregon

Bottom line

• Sole prop/SM-LLC (or both parents as partners): Potentially no FICA (to 18) and no FUTA (to 21) on your child’s wages—this is the classic tax advantage. IRS+1

• S-corp: You lose those family payroll tax exemptions; treat your child like any other employee for FICA/FUTA. IRS+1

• Oregon under-16: Tight hour caps, curfews, mandatory breaks, employer certificate, and strict task limits. OregonLaws+2OregonLaws+2Oregon