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How to Help Your Kid Start a (Legal) Business

Business News Daily Editor
Business News Daily Editor

Lemonade stands and lawn mowing are popular ways for kids to earn pocket change, but could they get in legal trouble for their entrepreneurial activities?

  • Kids' businesses are still businesses and need proper permits.
  • Having a business can teach children responsibility and good money sense.
  • Protect your children by making sure their business is legitimate.

Kids just want to be kids. But kids also want to be grown-ups. That's why letting kids have neighborhood lemonade stands, yard sales or lawn mowing businesses is a great way for them to learn responsibility and the value of a dollar.

However, child-run businesses can sometimes run into problems if they're not legal. Believe it or not, neighbors will complain to have a business shut down if there aren't proper permits and paperwork.

"Cities, countries and states have laws that require businesses to secure permits and licenses to operate," said Mark Williams, customer service operations director at BizFilings. "Those rules can extend to just about every business, including those owned by a child."

An increasing number of states and communities have started to make it easier for young entrepreneurs to make money, but in many communities, children and teens need to secure the right paperwork to lawfully run their businesses, according to Williams. Depending on the age of the child, a parent will need to help.

"For the typical lemonade stand, lawn mowing business or snow shoveling operation, young entrepreneurs will need to check with local officials to determine the compliance requirements," Williams said.

Can kids have a business?

Yes, kids can have businesses. Having a business is a great way for children to focus their energy and efforts on something positive instead of sitting around the house. It is important to note that a business is a business, no matter the age of the person in charge.

Businesses must adhere to certain legal requirements, and parents must understand these requirements to make sure their kids' businesses are legal. In addition to completing paperwork, such as that to obtain a permit, you may have to pay taxes on the money the business earns. If your kids earn more than $400, they may have to pay some type of tax.

Do your homework.

The first step is to search for more information on the website of the city and county where the business will be located, or just head down to your city hall to find the officials in charge.

Williams said these officials can often be found in a community's finance or revenue departments. To secure a permit or a license, business owners will need to fill out forms and pay a fee, which can start around $50.

Do kids need a business license?

Yes, any business needs a license, even if it's run by a kid; the age of the person running the business does not matter. It is important to make sure your kid's business is up to code because anyone can decide to report the business to the authorities.

City and county officials in the jurisdiction where the business is located can outline the requirements, explain penalties for noncompliance and provide the proper paperwork to get the process rolling.

You might be asking yourself, "Why go through all of this if it's just a lemonade stand? What harm could be done?" Williams warned that neighbors or passersby often have the time and proximity to tattle.

"In some cases, neighbors may feel inconvenienced, because customers to the lemonade stand next door are blocking their driveways or adding more noise or traffic to their usually quiet residential street," Williams told Business News Daily. "Passersby may be concerned that teens handing out fliers for their snow-shoveling business may be casing a neighborhood and up to no good."

In addition, competitors have snitched on kid-owned businesses. A landscaping company, for instance, could report a teen-run lawn-mowing business for noncompliance to weed out cheaper competition.

It's also important to be aware of the legal risks and liabilities of not making sure your child's business is legally compliant.

"Kids who run their businesses without the correct permits or licenses can face closure and other penalties, including but not limited to fines," Williams said. He added that a run-in with regulators is almost never a fun experience, especially for a young entrepreneur who is dreaming big.

But fear not: For parents who want to help a child start a business, there are plenty of resources out there to make sure it is done the right way. For example, the Small Business Administration provides links to state-specific license and permit information, and even offers resources for home-based businesses.

What are good businesses for kids?

The best way to decide what type of business is right for your kid is to encourage them to pursue their passions. If your child can work in an area they enjoy, start by helping them find that area.

When a parent thinks about helping their child start a new job, the first jobs that often come to mind are setting up a lemonade stand and babysitting. But there are many other jobs that can be even more exciting to a child. Children may be excellent at making baked goods and candy, for example. If they are not interested in doing the baking, they can decorate the desserts instead; they may be able to find a baker who needs a decorator. Or, perhaps they love animals, so they can be dog walkers or pet sitters. And someone always needs to have a car washed, so kids could start a car-washing business. They could even start a YouTube channel or a podcast for other children.

For more ideas on businesses you can start with your child, check out this Business News Daily article.

Image Credit: RawPixel.com / Shutterstock
Business News Daily Editor
Business News Daily Editor
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Business News Daily was founded in 2010 as a resource for small business owners at all stages of their entrepreneurial journey. Our site is focused exclusively on giving small business advice, tutorials and insider insights. Business News Daily is owned by Business.com.