Can I tell if a seller's family members are being paid for work they don't actually do?

It takes a closer look than a general payroll summary usually provides, since "family member on payroll" isn't inherently improper — plenty of small businesses genuinely employ relatives who do real work — but it's also a common way expenses get quietly padded or income gets diverted before a sale. The way to tell the difference is to look at what each person on payroll actually does: their role, hours, and whether there's anything to show for the work beyond the paycheque itself, compared against payroll costs generally being treated as a legitimate operating expense of the business.

This connects to the broader "add-back" question sellers often raise, since a family member's compensation sometimes gets proposed as an add-back on the theory a new owner "wouldn't need" that role — which may or may not be true depending on whether real work was actually being done and would still need to be covered by someone.

Ask for a role-by-role breakdown of who's on payroll and what they do, and treat vague answers about specific individuals' actual duties as a signal worth pursuing further. A Treadstone business lawyer can help build representations about payroll accuracy into your agreement.