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Start Your Business Startup Basics

How to Help Your Kid Start a (Legal) Business

How to Help Your Kid Start a (Legal) Business
Credit: RawPixel.com / Shutterstock

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.

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

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 warns that neighbors or passers-by 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. "Passers-by 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 to neighbors and passers-by, 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," said Williams. 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 wanting 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 Association (SBA) provides links to state-specific license and permit information, and even resources for home-based businesses.

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

Jennifer Post

Jennifer Post graduated from Rowan University in 2012 with a Bachelor's Degree in Journalism. Having worked in the food industry, print and online journalism, and marketing, she is now a freelance contributor for Business News Daily. When she's not working, you will find her exploring her current town of Cape May, NJ or binge watching Pretty Little Liars for the 700th time.