If you've worked in a family-owned business for a number of years and your boss happens to be a family member, you can certainly list them as a reference. Of course, it's likely that people calling the reference are going to tend to discount a positive reference coming from a family member since it is rather likely that a family member would, if not lie, then at least shade the truth when describing the applicant's work history. If you are solely interested in someone to confirm dates of employment and/or a job title, it would be preferrable if you could find someone employed at the company that can do that who is not a family member or is at least a more distant family member.
The less formal and less longstanding the employment arrangement, the more problematic a reference from a family member gets. If you've been employed in the family business for 20 years, for example, a reference from a supervisor that happens to be related to you isn't going to raise many red flags. If you've for a few months on-and-off building a web site for your father's company, on the other hand, the reference is likely to be much more suspect because your the relationship will be much more personal than professional and the work experience is likely to be much less similar to what you'd find in the "real world". A reference from some other customer that you had done work for that wasn't related to you would carry much more weight.
