How a Kid Can Start a Business

As much as kids want to be kids, there are those times that they like pretending to be grown-ups. They dress up like adults, talk like adults, and pretend to work like adults. Playhouses even have stalls where kids can pretend to be doctors, farmers, firemen, teachers, etc. These are opportunities for them to understand that adults have responsibilities and should learn about them.

Then comes the chance for kids to sell their old toys or maybe sell lemonade in your front yard for the summer. This is an excellent opportunity to encourage and educate your kids about earning money for something they like or if they want to save money for their future.

Businesses run by kids are often shut down because they do not have permits or proper documentation and paperwork. If you live in a gated community or a subdivision or cul-de-sac, sometimes neighbors can be more forgiving, but if not, you might run into a problem if you are not careful.

“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.”

More communities and states are making it easier for children or young entrepreneurs to earn money. But as we mentioned above, there are some places [communities] where they still have to secure the right paperwork to run their businesses legally, according to Williams. Parents still need to help their children, of course, depending on their age.

“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.

So, depending on what your kids want to do, this potential business is undoubtedly a fun way to inspire their creativity and confidence. The main objective of a child-run business is not primarily driven by money for the most part because if it is, getting a job should be the way to go. But opening a business provides priceless life experience for kids – plus it develops practical skills like organization, problem-solving, money management, and communication.

Here are some tips to help your kids have a great experience with their thriving business:

Let Them Choose a Business to Pursue

Your kids must choose a business that they are most passionate about. You want them to enjoy every business venture experience they are going to have and not lose interest a day or two after they started it.

If they do not have a specific business idea in mind, then let them make a list of the things they love to do. If they want to create arts and crafts, they can sell it online. If they love animals, they can consider doing a pet-walking or pet-sitting business. If they like teaching, they can maybe do workshops at the clubhouse or in your front yard.

Please encourage them to think outside the box. Avoid saying things that could discourage them from the ideas that they have. This process should always be a learning experience; the result doesn’t necessarily matter – as long as they learned something from it.

Make a plan and set goals. If possible, allow your kids to plan out their goals for their business. Let them imagine what it will be when it becomes a reality. If they need supplies, what would they be? They should write down their goals for their business. Let them answer questions like: ‘what do they want to achieve?’ Their answers will amaze you.

Introduce the Concept of Financial Planning

Running a business is an excellent opportunity to get your kids acquainted with basic money management. Financial planning isn’t merely about crunching numbers; it’s about constructing a sturdy framework upon which to build future success. As Quidable’s financial strategist Philip Edwards explains, “Financial planning is not just about numbers; it’s about building a strong foundation.” This underscores the importance of grasping key concepts such as budgeting, saving, and investing from the outset.

At its core, budgeting is the cornerstone of effective money management. It involves allocating resources wisely, ensuring that expenses align with income and strategic priorities. By creating and sticking to a budget, young entrepreneurs can gain control over their finances and make informed decisions about where to allocate funds for their business ventures. Whether it’s investing in product development, marketing efforts, or operational expenses, a well-crafted budget serves as a roadmap for financial success.

In addition to budgeting, saving plays a pivotal role in financial planning. Saving involves setting aside a portion of income for future use, whether it’s for emergencies, opportunities, or long-term goals. By cultivating a habit of saving early on, young entrepreneurs can build a financial safety net and position themselves for future growth and expansion. Furthermore, saving provides the flexibility and freedom to capitalize on unexpected opportunities or weather unforeseen challenges that may arise in the dynamic landscape of entrepreneurship.

Investing is another fundamental aspect of money management that young entrepreneurs should familiarize themselves with. Investing entails putting money into assets with the expectation of generating returns over time. Whether it’s stocks, bonds, real estate, or starting a business, investing allows individuals to grow their wealth and build financial security for the future. Understanding the principles of investing empowers young entrepreneurs to make strategic decisions about where to allocate their capital, maximizing potential returns and mitigating risks along the way.

Manage the Legal Aspect of the Business and Pay Taxes

Business owners, young or old – are subject to the same rules and legal requirements. Check with your local city, country, or state clerk’s office about local licensing or permits that your child will need for their business.

If your child earns more than £1,000, they’ll be required to file their tax return. In the United States the figure is $400. Most likely, they won’t have to pay for income tax, but they will need to pay for self-employment tax. Help your kids prepare for this ahead of time by setting aside 15 percent of the earnings for tax time. They’ll report their business income and expenses on Form 1040 Schedule C, and self-employment tax is reported on Schedule SE. And if you’re wondering — yes, you can still declare your child a dependent even if they file their return.

Final Thoughts

Once your business has started, you have to let your child know that a business can flop over and fail. We can’t stress enough how imperative it is to care for and believe in your business continuously. Imbed in their minds that this should always be a labor of love for everyone. Remember your mistakes and learn from them.