It is a good idea to go about it as if they were not friends or family. Sometimes it is even more difficult with friends or family because they may feel the regular rules and job duties do not apply to them. Follow the same procedure as if it were someone hired that you do not know..this will help to avoid situations later on. If you are having difficulty setting this standard..tell them it is policy and that your attorney advises you to have this done before ANYONE can work for you.
Personally I strongly suggest if you value your friendship, I would not hire them. It may be fine for a year, 2 or even more but when something goes wrong you can pretty much count your friendship over. If you truely value them, stay friends and no more.
Example: A friend asked if we could hire her sister, she needed a job and we had a chair open. We specifically told her that if things didnt work out, dont hold us accountable as friends. Well things didnt work out and we were forced to let her go. Guess what those strong friendship bounds that lasted 14years were tossed out and she started bad mouthing us to people. Really sad.
It`s just not worth it, stay friends.