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The dangers in hiring family members for your business

by Frank Stitely 12. October 2010 02:56

The dangers in hiring family members for your business

Business owners are frequently tempted to hire spouses or other family members to work in their businesses. For several reasons, we strongly advise against this.

First, efficient businesses hire employees based solely on qualifications to carry out the tasks required for a particular job. When employees are hired for reasons other than qualifications, business owners end up with unqualified employees. For example, a business owner may trust his spouse and trust is an inherent requirement for a bookkeeper. However, if the spouse is not trained as a bookkeeper and has little or no relevant experience, the business owner can expect a real mess with his books at tax time. We see this all the time.

Second, a family member who is hired tends to inherit authority in the business above and beyond what is normal for the position. For instance, when a business owner hires his/her spouse as a bookkeeper, the bookkeeper position is imbued with the authority of the owner. Other employees, even executives, will be unwilling to challenge decisions of the spouse/bookkeeper. Thus, the bookkeeper position ends up with authority above and beyond what is appropriate for a bookkeeper.

I would love to cite the many disasters over the years that Paul and I have seen when business owners hire family members. However, I don’t want to offend anyone.

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