How to Help Your Kid Start a (Legal) Business

Children often have lofty aspirations and an extraordinary imagination. Some people’s dreams involve starting their own businesses. Businesses can provide kids with the space to be innovative and creative while earning some money. Even though more states and communities have made it simpler for young people to start businesses and make money, kids and teenagers still need to obtain the necessary documentation in order to legally operate their enterprises.  

What laws apply to children’s businesses?

No matter how old the boss is, a business is still a business. If a child-run business is illegal, they may encounter severe issues. 

According to Mark Williams, a former senior leader at BizFilings, “cities, countries, and states have laws that require businesses to secure permits and licenses to operate.” “Those regulations apply to practically every business, including those run by children. The compliance requirements for the typical lemonade stand, lawn-mowing business, or snow-shoveling operation must be confirmed with local officials.

Parents should be aware of the legal requirements that must be followed by all businesses in order to ensure that their children’s ventures are legitimate. To determine which paperwork you’ll need to fill out to start the business and what permits you’ll require, you’ll want to assist your child in choosing the right business structure for their idea. The majority of businesses opt to establish themselves as LLCs. [If you choose this course of action, see our article on how to form an LLC.]

However, before you launch this business, be certain that you are comfortable with its tax obligations. Your child will be required to pay taxes on any profits made if their business is profitable enough to generate more than $400. Fortunately, you can rely on experts and tools to get you through these initial stages.

Visit the city and county websites where the business will be located to learn more. You and your child can also go to City Hall to meet with the people in charge of business licensing since every business, even one run by a child, needs to have a business license. Williams claimed that the finance or revenue departments in your community frequently house these officials.

How do young people get a business license?

The criteria for obtaining a business license vary by state. In most states, the Most states require the child to submit a business plan, which will demonstrate their business acumen and awareness of the financial and legal constraints of their intended venture. Opportunity for children and teenagers to learn more about how businesses form and operate.

Owners must complete forms and submit payment in order to obtain a permit or business license. The requirements, penalties for noncompliance, and necessary paperwork can all be provided by city and county officials in the area where the business is located.

Kids must be aware of the state’s laws on teen and child labor as well as laws for making contracts with minors when they apply for a business license. While even though most contracts can be legally signed by minors, they frequently have different conditions, and some call for parental consent. On the scope of your child’s business, it may need outside funding, and minors cannot legally apply for a small business loan on their own. 

The best time to begin is as soon as your child has a fully formed business idea because getting a business license can be a drawn-out process. In order to give your child enough time to obtain the necessary permits, you should start the licensing process a few months before the season in which they plan to hold a summer bake sale or shovel snow.