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Animals forming social groups that include breeders and nonbreeders present evolutionary paradoxes; why do breeders tolerate nonbreeders? And why do nonbreeders tolerate their situation? Both paradoxes are often explained with kin selection. Kin selection is, however, assumed to play little or no role in social group formation of marine organisms with dispersive larval phases. Yet, in some marine organisms, recent evidence suggests small‐scale patterns of relatedness, meaning that this assumption must always be tested. Here, we investigated the genetic relatedness of social groups of the emerald coral goby, Paragobiodon xanthosoma. We genotyped 73 individuals from 16 groups in Kimbe Bay, Papua New Guinea, at 20 microsatellite loci and estimated pairwise relatedness among all individuals. We found that estimated pairwise relatedness among individuals within groups was significantly higher than the pairwise relatedness among individuals from the same reef, and pairwise relatedness among individuals from the same reef was significantly higher than the pairwise relatedness among individuals from different reefs. This spatial signature suggests that there may be very limited dispersal in this species. The slightly positive relatedness within groups creates the potential for weak kin selection, which may help to resolve the paradox of why breeders tolerate subordinates in P. xanthosoma. The other paradox, why nonbreeders tolerate their situation, is better explained by alternative hypotheses such as territory inheritance, and ecological and social constraints. We show that even in marine animals with dispersive larval phases, kin selection needs to be considered to explain the evolution of complex social groups. [ABSTRACT FROM AUTHOR]