Family Ties: Why More Small Businesses Are Hiring Their Children

Key Findings

• The share of small businesses employing a child of the owner has increased by more than 50% since January 2018. Furthermore, 40% of people who started a business in 2023 did so because they wanted to create an asset to pass on to their children. Training them in the business is a key way to pass along that asset.
• A majority of that increase took place at the onset of the Covid-19 pandemic and in 2023 and 2024. The Covid-19 pandemic saw the first increase in the share of businesses that employ an owner’s child, and then the level stayed relatively flat for the next couple of years.

Intro

The last several years have seen a surge in the number of business owners hiring their own children. In fact, the share of small businesses employing their kids has doubled since January 2018 — with most of the growth happening during two critical periods: the immediate onset of COVID-19, and again over the past 18 months.

This pattern offers an important window into how small business owners navigate tough hiring environments and succession planning for the future. It suggests two key dynamics:

• First, when job opportunities are scarce, small business owners may offer roles to their children as a way to provide them stability.
• Second, when hiring external candidates is difficult — as it has been with labor shortages over the past few years — business owners turn to the people they trust most: their own families.

A Different Kind of “Great Reshuffle”

One particularly striking finding was that child employment in family businesses remained steady even during the “Great Reshuffle” of 2021–2022, a period when the broader labor market was characterized by unprecedented job-hopping. Children who joined the family business stayed put.

This stability hints that hiring children isn’t just a stopgap — it’s a successful long-term strategy. Parents benefit from reliable employees; children gain job experience and financial security; and the businesses maintain continuity during turbulent economic periods.

In short, it appears to be a win-win-win.

Family at the Core of Small Business

Small business has always been a family affair. In a survey we conducted last summer, we found that 43% of small businesses employed family members as W2 employees — and when including contractors and unpaid contributors, over half of small businesses involved family in some way.

While this includes spouses and partners, not just children, it reflects a broader truth: small businesses are often extensions of their owners’ identities, values, and aspirations. Hiring family members is a natural choice for many.

There are also real advantages:

• Reputation Management: A family member may feel a deeper personal investment in the business’s success and brand.
  
• Financial Benefits: Depending on age and tax status, hiring children can create opportunities for college savings, early retirement contributions, or health benefits. For instance, adult children (ages 18–26) can get their own health insurance through the business — making premiums a tax-deductible expense.
• Legacy Building: A previous Gusto report found that 40% of entrepreneurs started their businesses with the goal of creating an asset to pass on to their children. Hiring children now can be critical training for future ownership.

Succession planning is becoming even more urgent as Baby Boomers retire. A 2018 SBA report found that over half of small business owners were planning to exit their businesses within 10 years, with a third hoping to keep the business in the family. Preparing the next generation through on-the-job experience could be essential to realizing that goal.

Hiring Family Isn’t Without Risks

Still, business owners need to be thoughtful when bringing children into the business. Some common challenges include:

• Skills Gap: Children may lack the owner’s market knowledge or strategic experience, potentially putting the business at a disadvantage.
• Blurring Boundaries: Mixing personal and professional relationships can lead to different (and sometimes unrealistic) expectations.
• Operational Complexity: Even administrative tasks can require expert-level skill in a growing business, and family hires need to meet those high standards.

Methodology

Using a dataset of over 400,000 small businesses, we identified small businesses for which we could identify the last name of the owner with high certainty. We identified businesses with a child/owner pair as businesses where at least one person under 30 was employed by the business with the same last name as at least one owner older than 50. We exclude businesses where the owner has one of the top 100 most common last names in the United States.