While many of the skills we possess as children are formed from the interactions we have with adults, it’s refreshing to see some kids getting creative with thoughts and ideas. While too young to truly understand what it means to be a business owner, there are many young entrepreneurs out there with ideas that solve problems (or who are looking to make some extra money).
Many question whether kids can become young entrepreneurs, and how they can run a business successfully. If you do some searching online, you will find teen entrepreneurs all over the world running their own businesses and making a great source of income. In this article, we’ll help you understand how to start a business as a teenager.
Can Teen Entrepreneurs Start a Business? How?
Absolutely. The process of starting a business is almost the same as it would be for someone over the age of 18, with a few exceptions and limitations which we will discuss below. Here are some of the steps teen entrepreneurs must take in order to start their own business (which an adult can obviously help or assist them with).
1. Determine a Demand for the Product or Service
Before moving ahead with starting a business, young entrepreneurs need to do some research. Will their ideas grow legs and take off? Is someone already doing or selling the same product or concept? Are they successful? What is their price point? What can you sell your product or service for? How will you differentiate? Is it a trend that will soon fizzle out? Think about the overall business model and long-term strategy on whether or not the business could be successful.
2. Research and Decide on a Business Name
Just like any other business, young entrepreneurs need to figure out what to legally call their business and research to ensure no one else currently holds the name. The name should include keywords that help people identify what the actual company sells or does. For instance, Dunkin Donuts clearly helps people understand that this business sells tasty treats.
If you need help determining whether the name you want is available, Incfile’s Business Name Search tool is an invaluable resource.
3. Register the Business Legally
For most young entrepreneurs, an LLC business structure will be the best fit for a formalized operation. Registering the business can be done independently, via an attorney or using a business formation service such as Incfile. An adult would also need to be a part of the business in order to help get funding, acquire any necessary loans, secure credit and co-sign important documents.
4. Obtain Any Licenses or Permits Needed
Depending on the type of business being formed, teen entrepreneurs would need to obtain certain local, state, and federal permits or licenses in order to legally conduct business. Each state is different, so make sure to research what applies in your specific situation.
Incfile’s Business License Research Package can give you all the information you need for this step in a single, easy transaction.
When it comes to taxes, the government has some useful information regarding young entrepreneurs and how their income will be taxed. Find out more on the IRS Student’s Page for Young Entrepreneurs. You can also get help filing business taxes from Incfile.
What Are the Limitations Teen Entrepreneurs May Experience?
It can be extremely difficult for teen entrepreneurs to secure funding like loans or credit for a startup business – especially since at their age they don’t have a credit history.
Another area where young entrepreneurs are limited is their overall reach. While the younger generation is great with social media, their customer demographic might not be. Teens can certainly create a business page on social media, but the way they communicate would need to resonate with their target consumer and audience.
All businesses should have a website, and young entrepreneurs will likely need to pay someone to build an ecommerce site for them that would allow for payment processing. Or, if they have a physical product, going through Amazon to sell using their FBA program (Fulfillment By Amazon) would be a great idea.
Maturity also comes into play. How do young entrepreneurs deal with failure? Because in business, there will be many. Do they have patience? Getting into business is a long-term play, and young entrepreneurs need to be able to see the big picture.
One of the biggest limitations that teen entrepreneurs face would be time. As you would imagine, teens will generally be at school during the day. Education is important, and it cuts into how productive young entrepreneurs can be working on their business. After school, would they rather hang out with their friends, or work on their business? Unfortunately, doing both can be difficult.
Can Young Entrepreneurs Hire Employees?
They certainly can. However, they should first determine whether they truly need to hire someone, or if they can continue to put in the work themselves. Hiring an employee or employees can become extremely expensive with payroll, insurance, unemployment, benefits, etc. to think about. All of those things take money – something you may not have a lot of in the early stages of your business.
When the time comes, here are some things to consider when looking to hire employees:
- What do you want your employees to handle?
- How much money are you willing to pay your employees?
- If you have an LLC business structure, should you consider changing to a corporation? It would be a good idea to speak with a CPA on this topic.
- Will the employees be part-time or full-time? There are extra responsibilities if you have full-time employees, such as benefits, insurance, etc.
- What qualifications are you looking for in your employees?
- How will you interview potential employees?
- How will you make the final decision as to who you hire?
In any case, teen entrepreneurs should prepare for a long but rewarding road ahead. The good news is that you have time on your side thanks to your age. Roll with the punches and never give up on your dreams. If your product or service can change lives, do everything possible to get your brand and company in front of the world.