Young Entrepreneurs; Advice for Starting a Business as a Minor
by NicoleD, Former Moderator
- Created: October 29, 2010, 1:43 pm
- Updated: February 17, 2011, 4:09 pm
Many young people find that they have the determination, time, and resources to start a business before their 18th birthday. Young entrepreneurs face the same opportunities and challenges that their adult counterparts do, but there are also some legal considerations that apply specifically to this group of budding businesspeople. For commonly asked questions about starting a business as a minor, read on.
Can a minor sign a contract?
Technically, yes, a minor can sign a contract, but because minors are not considered to have the legal competency to enter into a binding agreement, they have ability to "disaffirm*" the contract - which essentially voids their end of the bargain. In most states, people under the age of 18 are considered minors.
How can a minor form a business entity?
If a parent chooses to form the business on behalf of their child, they can act as an authorized signer. Liabilities apply in these situations, and parents can be held responsible if their dependent is negligent in matters of operating the business. It's a good idea for parents to consult with an attorney and certified public accountant (CPA).Some states allow minors to act as shareholders or serve on an advisory board of a business. Learn more about state regulations. In situations of legal emancipation, a guardian can be appointed by the courts to work with the minor on business decisions.
Will young entrepreneurs have trouble getting a loan or credit?
The disaffirm condition we reviewed earlier will likely hinder some lenders from drawing up a loan agreement with a minor. Anyone with poor or no credit history may find it difficult to secure traditional financing - young entrepreneurs included.
Credit cards applications are open to people ages 18 and older, but minors may apply for a card under their parent or guardian's account. Keep in mind that payment liability will generally fall onto the minor's parent or guardian.
How should a young entrepreneur pay taxes?
The IRS offers specific tax guidance for young entrepreneurs, including resources to determine if you need to file federal income tax returns.
Can a minor claim copyright?
According to Copyright.gov, "minors may claim copyright, and the Copyright Office issues registrations to minors, but state laws may regulate the business dealings involving copyrights owned by minors." Copyright.gov advises that you consult a local attorney for specific guidance.
Isn't experience necessary to run a successful business?
A background in business does not guarantee a successful venture, but it is important to understand the risks and challenges that any new business faces. To compensate for a lack of business know-how, young entrepreneurs do not have to look far. Find a local entrepreneur with experience running a successful business and ask them to mentor* you through your journey. A relationship with an established business leader may also lend credibility to the business and help to secure financing.
- Read and Comment on Discussions about Young Entrepreneurs in the Community
- Words of Inspiration for the Aspiring Entrepreneur
- SBA's Teen Business Link
- Preparing for Entrepreneurship; 3 Educational Programs that Help Teens Get into Business
*In some states, minors who are not under the care of a parent or guardian may sign contracts for necessities (like food or shelter) and are legally bound to those contracts.
Message Edited by NicoleD on 12-11-2009 04:22 PM
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