These ventures don’t just make money. If extra income is a priority, a job may be the better option. However, starting a business can provide invaluable experience in life for children. It also helps them develop practical skills such as organization, money management, and problem-solving.
Here are some tips for making this summer a successful one for your budding entrepreneur:
1. Select a business. Let them follow their passion.
Your child should be passionate about the work he or she does. It is important that they enjoy the experience and don’t lose interest.
If your child does not have a business idea, ask them to make a list. They could also start a pet-walking business or pet-sitting company if they are passionate about animals. They might be interested in selling candles on Etsy by making candles. They could also hold an acting workshop, teach music lessons, or design a mobile application.
It is okay to think out of the box. Tony Hsieh, the founder of Zappos, started a worm farm when he was nine years old to become the “number one worm farmer in all of the world.” He also refused to believe that it would not work or that anyone would pay them for their idea. The result is not necessarily the most important thing.
2. Make a plan and set goals.
Think about the details that will make your idea a reality. What equipment, training or supplies do they require? What equipment, supplies or training do they require to mow lawns? They will need a lawnmower, gas, and other supplies. Do they need to take CPR and first aid training before they babysit?
Write down your business goals, both financial and otherwise. These goals can be re-visited in September, which will be educational and fun.
3. Introduce the concept of money management.
Summer businesses are a great way for kids to learn basic money management skills, as well as more complex topics such as managing overheads and calculating gross profit. Teenagers can track income and expenses. Younger children can practice adding up prices and counting change.
To help your child start a business, you may have to lend money. You may need to give your child money to help them start their business. Have them list all upfront costs so they can calculate how much. As long as your child contributes some of their allowance or birthday money, you could offer to fund a specific amount. A meeting could be held where your child presents their idea and discusses their financial needs.
4. Improve your customer service skills and communication skills.
Entrepreneurship requires the ability to communicate effectively and listen well. Your child should learn how to explain succinctly their product/service, and what their business’ value proposition is. Encourage your child to be responsive to special requests and stress the importance of customer service.
5. Take care of the legal requirements
Children business owners must follow the same legal rules as adults. Check with your local clerk’s office to find out if permits or licenses are required.
You may want to set up a company structure if your family is concerned about the success of the business or how it will affect their assets. For example, our oldest son loves designing apps. If we feel that an app will be a commercial success on iTunes, then we’ll roll it under our holding firm. If we don’t have a holding company for the app, we would form an LLC (Limited Liability Company). You decide what your child’s business is and how your family will protect themselves.
6. Pay taxes
Your child will need to file their tax return if they earn more than $400. They won’t likely owe income tax but will have to pay self-employment taxes. You can help them prepare by setting aside 15% of their earnings for tax purposes. Their business income and expenses will be reported on Form 1040 Schedule C. Self-employment tax will be reported on Schedule SE. In case you were wondering, your child can still be declared dependent even if they file their return.
It is important to remember that it should be enjoyable. Entrepreneurship is not just about work. It’s a labor of love. Entrepreneurship is about taking risks, making mistakes, learning from them, and then doing it again. Ensure that you keep these messages in your mind throughout the journey.