top of page

How to Help Your Child Start an Online Business

If your child just blasted through our list of ‘10 Free Coding Games That Teach Programming Skills’ with little to no effort, they might be ready to start an online business. Today’s generation of digital natives can be surprisingly confident in terms of navigating the virtual world. They may even come up with better online business ideas compared to most adults. In fact, the article ‘How to Help Your Kid Start a (Legal) Business’ explains how it is a very healthy way “for children to focus their energy and efforts on something positive instead of sitting around the house”. This can range from setting up an online store to offering services. They may even become the next big YouTube personality.

At the same time, laws and regulations that either limit or prohibit children from becoming entrepreneurs differ from state-to-state and can be complicated. This brings us to the first main concern when it comes to helping your child start an online business.

Research the Legalities of Doing Business with a Child

Protect your child and yourself from legal troubles by familiarizing yourself with the laws and regulations involved in doing business with a minor. For instance, while minors are allowed to sign contracts, they’re also allowed to back out of legally-binding agreements, making those contracts useless in court. If they’re in their teens, you should also brush up on emancipation rules in your state. The age of emancipation in states like Florida and Washington for instance is 16, while it varies from 14 to 18 in other states.

When they reach this age, with the help of their parent or guardian, they can petition a court to have almost all the rights and privileges of an adult – including signing a legally-binding contract or owning their own business. Apart from protecting your family, brushing up on the legalities will allow you to better form a plan for completely handing over the business to your child when they come of age if that’s your goal. In terms of business ownership, it’s also important to look at what type of business structure you should form.

Form a Partnership or a Limited Liability Company

Most states don’t allow minors to form corporations and a sole proprietorship is for lone owners. The best options to help your child structure their business is to form either a partnership or a limited liability company (LLC). As the guide to partnership formation by The Balance writes, this entails creating a partnership agreement. You can also choose between a general and limited partnership, where the latter allows limited partners to act only as investors.

For a more official route you can look to form an LLC. This business structure is known for being highly flexible which makes it ideal for online businesses. Be aware though that each state has their own steps to setting one up. In a guide to forming an LLC in California by ZenBusiness, one of the state’s legal requirements is an operating agreement. Like the partnership agreement, an LLC’s operating agreement can help you to structure the business’ ownership. And through an LLC’s articles of organization, you can even determine whether your company will be member-managed or manager-managed.

Both partnerships and LLCs also offer limited liability protection for its members, and can be taxed as ‘pass through’ entities, which means no double taxation from state taxes. You can also accomplish the registration process for both online. In short, either a partnership or an LLC would give you the most options for tweaking your online business structure in ways that are advantageous for both you and your child.

Consult Business Attorney and Accountant

Helping your child start an online business is potentially the most educational experience you can give them during their formative years. And if you want things to turn out right, you need to confer with at least your lawyer and your accountant. They can fill in any gaps you might have missed, and help you and your child develop a strategic online business plan that is both viable and completely legitimate in the eyes of the law. By following these steps you can create a strong foundation for your child’s online business to grow.

bottom of page