Yes, a 12-year-old can start a business, but almost every legal step has to run through a parent or guardian. No federal law bars minors from earning money as entrepreneurs. What blocks a child from doing it alone is contract law: anyone under 18 has limited capacity to enter binding agreements, so parents end up signing the leases, owning the accounts, and carrying the legal risk while the child runs the actual work.
Why a Parent Has to Sign Everything
Under longstanding legal principles across all 50 states, contracts signed by minors are “voidable.” The minor can walk away from the deal without the consequences an adult would face. A 12-year-old could agree to buy $500 in supplies from a vendor and then cancel with no legal penalty, which is why vendors, landlords, banks, and online platforms won’t deal directly with a child.
A parent or guardian solves the problem by co-signing agreements or entering them on the child’s behalf. Once the adult signs, the contract becomes enforceable against the adult, and the other party has the security it needs. In practice, the parent becomes the legal face of the operation. They sign leases, open accounts, accept platform terms of service, and take on liability for the business’s obligations. The child does the work.
For most 12-year-olds, this means operating as a sole proprietorship. No formal filing is required to create one. The child starts selling goods or services, and the business exists. Income gets reported on a tax return, but there is no separate legal entity to set up.
Businesses That Actually Work at 12
The best ventures at this age are service-based or creative work with low startup costs, no licensing requirements, and no age-restricted products. The common thread: nothing that forces the child to sign meaningful contracts on their own.
- Lawn care and yard work for neighbors — mowing, raking, weeding, seasonal cleanup.
- Pet sitting and dog walking, usually arranged through word of mouth.
- Handmade goods like jewelry, candles, baked goods, or art, sold at local markets and school fairs.
- Tutoring younger students in subjects the 12-year-old is strong in.
- Car washing and detailing in the neighborhood.
- Digital services such as social media graphics, short-form video editing, or digital art for small clients.
None of these require the child to enter significant contracts, hold special permits, or work in regulated industries. Anything involving alcohol, tobacco, firearms, or other age-restricted products is off the table under separate federal and state rules.
Where Child Labor Laws Apply and Where They Don’t
Federal child labor rules under the Fair Labor Standards Act regulate employment relationships, not self-employment. The Department of Labor’s guidance says its youth employment provisions “do not apply where no FLSA employment relationship exists.”1U.S. Department of Labor. Fact Sheet 43 – Child Labor Provisions of the Fair Labor Standards Act for Nonagricultural Occupations A 12-year-old running their own business is not in an employer-employee relationship, so the federal age minimums and hour limits don’t govern their own labor the way they would if a company hired them.
That carve-out has limits. State child labor laws vary, and some regulate self-employed minors more strictly than the federal government does. Federal rules also prohibit anyone under 18 from performing work the Secretary of Labor has declared hazardous, and that prohibition applies even inside a family-owned business.1U.S. Department of Labor. Fact Sheet 43 – Child Labor Provisions of the Fair Labor Standards Act for Nonagricultural Occupations Heavy machinery, mining, manufacturing, and similar hazardous categories stay off-limits regardless of who owns the business. If the young business owner ever hires other minors, those employees are fully covered by the FLSA.
Registration, Names, and Tax IDs
If the business operates under the child’s legal name, no name registration is needed. If the child wants a brand name, the parent files a “Doing Business As” (DBA) or fictitious business name registration with the county clerk or a state agency, depending on jurisdiction. The filing usually requires the legal names and addresses of both the parent and the child. Fees typically fall between $20 and $100.
A federal Employer Identification Number isn’t always required. A child working solo as a sole proprietor can use their Social Security Number for tax purposes. An EIN becomes necessary when the business hires employees, opens certain bank accounts, or later converts to an LLC. The IRS specifically says a minor child beneficiary does not qualify as the “responsible party” on the application.2Internal Revenue Service. Responsible Parties and Nominees The parent has to serve as responsible party, using their own Social Security Number and signature.3Internal Revenue Service. Employer Identification Number Applications can be filed online, by fax on Form SS-4, or by mail.
Local business licenses depend entirely on the city or county. Many small home-based services never come up on a municipality’s radar, but some require a general business license for any commercial activity within their borders. Check with the local clerk’s office before starting.
Banking and Getting Paid
A 12-year-old cannot open a bank account alone. The two workable options are a custodial account under the Uniform Transfers to Minors Act (UTMA) or a joint account with the parent. Under UTMA, the parent acts as custodian and manages the funds until the child reaches the age of majority in their state, at which point the child takes full control. A joint account gives both parent and child access, but the parent carries legal responsibility for overdrafts and fees. Either option requires the parent’s government-issued ID, Social Security Number, and proof of address.
Accepting card payments requires a merchant processing account, and every major processor requires account holders to be at least 18. Square, Stripe, and PayPal all enforce adult-only terms of service. The parent sets up the account in their own name and takes on the legal relationship with the processor.
Online selling platforms are the biggest sticking point at exactly age 12. Most set a minimum user age of 13, largely because the Children’s Online Privacy Protection Act restricts data collection from children under 13. Etsy states flatly that “individuals under the age of 13 are not allowed on Etsy.”4Etsy. Minors Policy Amazon, eBay, and Shopify all require account holders to be 18. A 12-year-old cannot have their own seller account anywhere major. The practical fix is a parent-owned account with the child managing products and fulfillment under supervision. The parent remains legally responsible for everything on that account. Farmers’ markets, school events, and neighborhood sales sidestep the platform problem entirely.
Taxes the Child Still Owes
Age does not exempt anyone from federal taxes. If a 12-year-old earns $400 or more in net self-employment income in a year, they must file a tax return and pay self-employment tax. The IRS is explicit that self-employment tax “applies no matter how old you are.”5Internal Revenue Service. About Schedule SE Form 1040 – Self-Employment Tax
Self-employment tax covers Social Security (12.4% on net earnings up to $184,500 in 2026) and Medicare (2.9% on all net earnings), for a combined 15.3%.6Internal Revenue Service. Self-Employment Tax – Social Security and Medicare Taxes The child reports business income and expenses on Schedule C and calculates self-employment tax on Schedule SE, both attached to Form 1040. Being claimed as a dependent on the parent’s return doesn’t change this. The child files their own separate return for the business income.
The “kiddie tax” that parents sometimes worry about does not hit business earnings. It applies only to unearned income like investment returns — a child’s unearned income above $2,700 gets taxed at the parent’s rate. Business profits are earned income and get taxed at the child’s own, usually much lower, rate.7Internal Revenue Service. Topic No 553 – Tax on a Childs Investment and Other Unearned Income
Track expenses from day one. Supplies, materials, and platform fees reduce net earnings and can drop the child below the $400 threshold entirely. Even if no return ends up being required, the records protect you if anything comes up later.
Sales Tax and Home-Based Rules
If the business sells physical goods, sales tax may apply. States generally require sellers to collect and remit tax on in-state sales, and many require a seller’s permit or sales tax license before the first sale, regardless of volume. Most states offer free online registration. Uncollected sales tax becomes a liability the parent will ultimately answer for, so check the state revenue department’s rules before the child starts selling products.
Working from home brings local zoning into play. Residential zoning usually allows “home occupations” but limits their impact on the neighborhood. Common restrictions include caps on the share of home floor space used for the business, prohibitions on exterior signage, limits on customer traffic and deliveries, and rules against non-household employees working on site. For handmade goods, tutoring, or digital services, these rules rarely cause trouble. Problems appear when foot traffic grows, inventory piles up, or commercial deliveries become routine. Some cities require a home occupation permit even for small operations; others only respond to complaints. Check with the local zoning office before the business grows past a casual hobby.