Can a Teenager Start a Business? What You Need to Know

Yes, a teenager can start and run a business in the United States. Gen Z entrepreneurs officially surpassed Baby Boomers in new business starts in 2025, according to Gusto's 2026 New Business Formation Report. Gen Z launched 9% of all new businesses that year, compared to 5% from Baby Boomers. The Global Entrepreneurship Monitor found that 18-to-24-year-olds are now tied with 25-to-34-year-olds as the most entrepreneurially active age group in America.

But "can" and "should jump in without preparation" are different things. There are real legal constraints, tax obligations, and practical limitations that apply specifically to minors running businesses. Understanding them upfront saves you from expensive surprises and protects both you and your parents.

This guide covers what is legally possible, what the taxes look like, how to structure a simple teen business, and what the realistic path forward looks like.

What a Teenager Can and Cannot Do Legally

What you can do:

• Operate a sole proprietorship (the simplest business structure: just you, earning money)
• Sell products and services to customers
• Open a business bank account with a parent as a joint account holder
• Accept payments via cash, Venmo, PayPal, and most payment processors (some have minimum age requirements; PayPal requires 18)
• File taxes as a self-employed person
• Earn self-employment income

What you generally cannot do independently (under 18):

• Sign a legally binding contract without a parent or guardian co-signing (minors can void most contracts)
• Formally register an LLC or corporation in most states (a parent can form the entity on your behalf)
• Open a business bank account solely in your own name
• Get a business credit card independently

The core constraint is contract law. Minors have the right to void most contracts, which means most counterparties (landlords, suppliers, payment processors) will require a parent or guardian to co-sign any formal agreement.

This is not a dealbreaker for most teen businesses. Many highly profitable small businesses operate as sole proprietorships with no formal contracts at all.

The Most Viable Business Structures for Teens

Sole Proprietorship (Most Common)

A sole proprietorship is simply you operating as yourself. No formal registration required in most states for simple service or product businesses. You earn money, you report it on your taxes, you pay self-employment tax.

This is the right structure for: lawn care, tutoring, babysitting, freelance design or writing, reselling, handmade goods, photography, music lessons, and most other small service or product businesses a teenager would realistically run.

What you need to start: nothing formal in most cases. Some states require a "doing business as" (DBA) registration if you operate under a business name (like "Jordan's Lawn Care" instead of your legal name). This costs $10 to $50 and a parent can file it with you.

LLC (With Parent Involvement)

A Limited Liability Company provides legal protection separating your personal assets from business liabilities. This matters if your business has genuine liability exposure, for example a physical product business where a customer could theoretically be harmed.

In most states, you must be 18 to be a member of an LLC. A parent can form the LLC, list themselves as the member, and operate it on your behalf while you do the work. This is more setup effort than most teen businesses need, but worth considering if you are selling physical products at scale.

Cost to form an LLC: $50 to $500 depending on the state, plus annual filing fees in some states.

Self-Employment Taxes: What You Owe

This is the part most teen business guides skip.

When you work a regular job, your employer withholds FICA taxes (Social Security and Medicare) from your paycheck and pays half themselves. When you are self-employed, you pay both halves yourself. This is called self-employment tax.

The IRS self-employment tax rate is 15.3% of your net self-employment income (12.4% Social Security + 2.9% Medicare). This applies on top of any income tax you owe.

Example: Jamie earns $4,000 from a tutoring business in 2026

*The 0.9235 multiplier is an IRS adjustment that reduces the self-employment tax base by the employer-equivalent half. The IRS also allows a deduction of half the SE tax from gross income.

The key rule: if your net self-employment income exceeds $400 in a year, you must file a tax return and pay self-employment tax. This $400 threshold was set by Congress in 1951 and has never been adjusted for inflation. It applies even if you are a dependent and your total income is below the standard deduction of $16,100 for single filers in 2026.

How to handle it: set aside 15 to 20% of every payment you receive into a separate savings account throughout the year. When you file taxes in April, you will have the money ready.

Common Business Types for Teenagers

Service Businesses (Lowest barrier, fastest to first dollar)

Lawn care, tutoring, babysitting, dog walking, photography, music lessons, social media management for local businesses. These operate perfectly as sole proprietorships with no formal structure.

Realistic monthly revenue: $200 to $1,500 depending on time invested and service.

Tax consideration: all net income above $400 triggers self-employment tax. Keep records of any legitimate business expenses (mileage to client locations, equipment, software).

Product Businesses (Physical goods)

Handmade items on Etsy, reselling on eBay or Poshmark, custom merchandise. A parent account is required for most platforms (Etsy and eBay require 18+).

Realistic monthly revenue: highly variable. $50 to $800 once established, with a slow ramp-up period of 3 to 6 months.

Tax consideration: track cost of goods sold (what you paid for inventory). This reduces taxable profit dollar for dollar. Keep receipts. Platform payments above $600/year may trigger a 1099-K form from the platform.

Online and Digital Businesses

Content creation, digital product sales, affiliate marketing, freelancing on Fiverr or Upwork (age requirements vary; Fiverr accepts 13+, Upwork requires 18).

Realistic monthly revenue: low initially ($0 to $100 for months), then potentially $200 to $1,000+ after 6 to 12 months of consistent effort. The Gusto report found that 71% of Gen Z founders used AI tools to help launch their businesses, which has dramatically lowered the cost and time needed to start.

Tax consideration: report all income regardless of whether you receive a form.

How to Keep Business Records (Simple Version)

You do not need accounting software to start. A spreadsheet with two columns (income and expenses) is sufficient.

Track every month:

• Date and amount of every payment received
• Any business-related expenses (equipment, materials, software, advertising, mileage at the IRS rate)

At the end of the year, totaling these gives you your net profit: the number you report on your taxes.

Common legitimate business deductions for teen businesses:

• Tools and equipment used for the business (mower, camera, laptop if business-use)
• Software subscriptions used for the business
• Materials and supplies
• Business mileage (driven to client sites, at the 2026 IRS rate of 72.5 cents per mile, increased to 76 cents per mile effective July 1, 2026)
• A portion of your phone bill if you use it for business

You cannot deduct your entire phone bill or laptop cost if you also use them personally. The deduction is proportional to business use.

Do You Need a Business License?

For most simple teen service businesses, no. A business license is typically required when:

• You operate a physical storefront
• Your business type is regulated by the state (food service, daycare, financial services)
• Your city or county requires a general business license for all businesses operating locally

Check your city or county website to see if a general business license is required in your area. If it is, the cost is usually $20 to $75 per year and a parent can obtain it for you.

For informal service businesses (lawn care, tutoring, babysitting operated under your own name), most jurisdictions do not require a license.

Having the Conversation With Your Parents

Most teen businesses require some parental involvement: opening bank accounts, co-signing anything that requires a contract, potentially providing startup capital, and co-filing taxes.

The conversation is easier if you come prepared:

1. What is the business and how does it work?
2. How much do you expect to earn per month?
3. What do you need from them (help opening an account, a ride to clients, startup money)?
4. How will you handle the taxes?

Parents are generally more willing to support a teen business when the teen has clearly thought it through. A typed-up one-page summary showing your plan is dramatically more persuasive than a vague request.

Real-World Examples

Example: Kezia, 15, photography business

Situation: Kezia had a good camera and strong social media skills. She offered to photograph a friend's birthday party for $75. Three referrals followed.

How she structured it: Sole proprietorship, no formal registration. Her mom opened a joint checking account they use for business deposits. She tracks all income and expenses in a Google Sheet.

Result: By year end she had earned $2,100 from 12 shoots. She owed $287 in self-employment tax, which she had set aside throughout the year. She invested $1,500 into a custodial Roth IRA contribution (within her earned income limit). See our guide on whether teenagers can invest in stocks for how that works.

Example: Theo, 16, reselling business

Situation: Theo started buying items at thrift stores and reselling on eBay using his dad's account (as he was under 18). He tracked all purchases and sales in a spreadsheet.

How he handled taxes: His dad received the 1099-K from eBay at year end (since the account was in his dad's name). They filed showing the income on a Schedule C, with Theo's cost of goods sold reducing his taxable profit. His net profit after deducting inventory costs was $1,450.

Result: He owed $199 in self-employment tax. His dad walked him through the filing. Theo now understands the full tax picture for a reselling business at 16.

Example: Morgan, 17, social media management

Situation: Morgan managed Instagram and TikTok accounts for two local restaurants, charging $150/month each. She found clients through her own strong personal following.

Legal setup: Her mom co-signed the informal service agreements (simple emails with scope and rate). Morgan invoiced monthly using a free Wave invoice template.

Result: $300/month in stable income with about 5 to 6 hours of work per week. She plans to scale to 4 or 5 clients before college.

The Most Important Thing to Get Right First

Before focusing on growth or income, get the taxes right. The single most common mistake teen business owners make is spending all their revenue without setting anything aside for self-employment tax. The bill arrives at filing time and can be hundreds of dollars they do not have.

The fix is simple: open a second savings account labeled "Taxes," deposit 18% of every payment into it, and do not touch it until April. If you over-saved, the extra becomes your next investment. If you under-saved, you will not be far off.

For the full picture on how teen income gets taxed, see How to File Taxes as a Teenager. For ideas on what kind of business to start, see How to Make Money as a Teenager Without a Traditional Job. To plan what to do with your earnings, try the Budget Calculator.

This post is for informational purposes only and does not constitute legal, financial, or tax advice. Business licensing requirements, contract laws, and LLC formation rules vary by state. Consult a licensed attorney or CPA for guidance specific to your business and state.