You can start a business as a teenager in any U.S. state, but a parent or legal guardian almost always has to co-sign the formation paperwork, the bank account, and the federal tax filings. The steps are the same ones an adult follows: choose a structure, file with the state, get a federal tax ID, and open a business bank account. The complication is that minors generally can’t sign binding contracts, so an adult provides the legal signature while you run the business.
Why a Parent Has to Be Involved
In most states, anyone under 18 lacks full legal capacity to enter binding agreements. You can sign a contract, but it’s “voidable” at your discretion, which means the other side can’t enforce it if you later walk away. Landlords, suppliers, and web hosts know this, and many simply refuse to deal with a minor directly.
That is the single biggest reason a parent or guardian stays involved. Your guardian co-signs contracts, appears on the LLC paperwork as a member or manager, and provides the legally binding signature on agreements the business needs. You still run day-to-day operations. When you turn 18, you can remove the guardian and take sole control.
What About Emancipation
Emancipated minors gain most adult legal rights, including the capacity to contract and form entities on their own. Emancipation is a court process with a high bar: you generally have to show you’re financially self-supporting, living independently, and mature enough to manage your own affairs. Most teen entrepreneurs won’t pursue it, but if you’ve already been granted emancipation, you can skip the guardian requirements that follow.
Choosing a Business Structure
Two options cover most teen businesses: a sole proprietorship or a limited liability company.
Sole Proprietorship
A sole proprietorship is the default. If you sell goods or services without filing anything, you already are one. No formation cost, no annual report, no separate tax return. The business is you. The downside is just as simple: you’re personally on the hook for every business debt and lawsuit. For something low-risk like tutoring or lawn care, that exposure may be tolerable. For anything involving products, contracts, or real money, it’s a problem.
Limited Liability Company
An LLC puts a legal wall between your personal assets and your business debts. If the business is sued or can’t pay a bill, your personal savings and belongings stay protected, as long as you keep business and personal finances separate. Formation means filing Articles of Organization with your state’s Secretary of State and paying a one-time fee that runs roughly $35 to $500 depending on the state. Because most states require full legal capacity to sign formation documents, your parent or guardian will likely need to be listed as a member or manager.
For most teen businesses with real financial activity, the LLC is worth the cost. The liability protection alone justifies it, and a formal entity makes it easier to open accounts, land contracts, and look professional.
Filing Your Formation Documents
If you go the LLC route, the state filing is your first bureaucratic step.
Pick a Business Name
Your LLC name must be distinguishable from every other registered entity in your state. Most Secretary of State websites have a free name-search tool. Use it before you get attached to anything. The name also has to include a designator like “LLC” or “Limited Liability Company.” Before committing, run the name through the U.S. Patent and Trademark Office website to make sure you’re not stepping on an existing trademark.
Appoint a Registered Agent
Every LLC needs a registered agent: a person or company designated to receive legal documents and official mail for the business.1Cornell Law School. Agent for Service of Process The agent needs a physical street address in the state (no P.O. boxes) and must be available during business hours to accept deliveries. Since most teenagers are in school then, a parent or a professional registered agent service is the practical choice. Professional services typically charge $50 to $300 a year.
File the Articles of Organization
Most states allow online filing through the Secretary of State’s website, often with approval in a few business days. Paper filing by mail works too but takes longer. The form is short: business name, registered agent’s name and address, members or managers, and a brief statement of purpose. Your parent or guardian signs as the organizing member. Once approved, you’ll get a certificate confirming the LLC’s legal existence, which you’ll need for the bank and other administrative steps.
Getting a Federal Tax ID
An Employer Identification Number is what the IRS uses to track your business. You apply using IRS Form SS-4, and the fastest route is the online application at irs.gov, which issues the number at the end of the session.2Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
The form asks for a “responsible party,” meaning the individual who ultimately owns or controls the entity. That person needs a valid taxpayer identification number, either a Social Security number or an ITIN.3Internal Revenue Service. Instructions for Form SS-4 (12/2025) The instructions don’t set a minimum age, but in practice the adult co-member or guardian takes this role because they’re already on the formation paperwork. When you turn 18 and take sole control, you update the responsible party by filing Form 8822-B within 60 days of the change.2Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
Keep the CP 575 confirmation notice the IRS mails after assigning the EIN. Banks will ask for it.
Local Permits and Home-Business Zoning
State registration creates the entity, but your city or county may require additional approvals before you can actually operate. Many municipalities require a general business license or operating permit, with fees from $50 to several hundred dollars a year. Food preparation, personal services, and anything touching health or safety usually need a specialized permit on top of the general one.
Zoning is especially important for teen businesses because most run out of a parent’s home. Most residential zones permit small, quiet home-based businesses as long as the home stays primarily a residence and the business doesn’t generate noise, traffic, or pollution that bothers neighbors. Some neighborhoods, especially those under HOA rules or planned development covenants, restrict or prohibit commercial activity. Check your local zoning ordinance and any HOA rules before you start advertising.
Opening a Business Bank Account
Keeping business and personal money separate is the whole point of forming an LLC. Mix them and a court can hold you personally liable for business debts anyway. A dedicated business account is non-negotiable.
Most banks require a minor to open a business account jointly with a parent or legal guardian. In-person at the branch tends to be more reliable than online for minors. Bring:
- The EIN confirmation (CP 575 notice or the printout from the online application)
- Your approved Articles of Organization or state certificate of existence
- Government-issued ID for you and your co-signing guardian
- Social Security numbers for both account holders
Ask about minimum balance requirements, monthly fees, and transaction limits before signing. Some banks waive fees for new small businesses or offer student-friendly terms, so shop around. Expect the bank to run a credit or identity check on the adult co-signer.
Credit Cards and Payment Processors
Under the Truth in Lending Act, credit card issuers generally cannot extend credit to anyone under 21 unless an adult co-signs and agrees to be financially responsible.4Consumer Financial Protection Bureau. Can a Credit Card Company Consider My Age When Deciding to Lend Me a Card? A business credit card will require your parent or guardian as a co-signer. For accepting customer payments, third-party processors like Stripe and Square set their own age rules. Some allow minors with parental consent, others require account holders to be 18. Read the terms of service before signing up.
Taxes You’ll Actually Owe
Your age doesn’t give you a pass on taxes. If you earn money from a business, the same rules apply at 16 as at 46. This is where most teen entrepreneurs get blindsided.
Self-Employment Tax
Any net earnings of $400 or more from self-employment trigger self-employment tax, regardless of age.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The rate is 15.3%: 12.4% for Social Security on earnings up to $184,500 in 2026, plus 2.9% for Medicare with no cap.6Social Security Administration. Contribution and Benefit Base You calculate it on Schedule SE and attach it to your Form 1040. You can deduct half of the self-employment tax from your adjusted gross income, which lowers the income tax portion of your bill.
That 15.3% shocks a lot of new business owners. As an employee, your employer pays half the Social Security and Medicare taxes. Self-employed, you pay both halves. A teenager with $5,000 in net profit owes roughly $765 in self-employment tax before income tax enters the picture.
Income Tax Filing
If your parents claim you as a dependent, your standard deduction is the greater of $1,350 or your earned income plus $450. Those are 2025 figures; the 2026 amounts will be slightly higher after inflation adjustments.7Internal Revenue Service. Topic No. 551, Standard Deduction Business profits count as earned income, so a teenager with $3,000 in net business income would have a $3,450 standard deduction, meaning little or no federal income tax on that amount. Self-employment tax still applies even when income tax is zero.
Quarterly Estimated Payments
If you expect to owe $1,000 or more in total tax for the year, the IRS wants quarterly estimated payments rather than one check in April.8Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals Due dates are April 15, June 15, September 15, and January 15 of the following year. Missing them triggers an underpayment penalty. One exception helps first-year business owners: if you had zero tax liability for the prior year, which most teenagers did, you can skip estimated payments for that first year.
What About Child Labor Laws
Federal child labor rules under the Fair Labor Standards Act restrict the hours and types of work minors can perform, but those rules apply to employment relationships, meaning someone hires a minor as an employee.9U.S. Department of Labor. Fact Sheet #43: Child Labor Provisions of the Fair Labor Standards Act A self-employed teenager running their own business isn’t covered. Some states have broader rules, so check your state’s labor department site if you’re unsure.
If your business grows and you want to hire employees, including other teenagers, the full set of federal and state labor restrictions kicks in for those workers. Hiring friends to help without understanding hour limits, minimum wage, and prohibited tasks for minors is a quick way to create liability.
Keeping the Business in Good Standing
Filing the paperwork is the start, not the finish. An LLC has ongoing obligations, and ignoring them can get your entity administratively dissolved by the state, which erases your liability protection.
Annual Reports
Most states require LLCs to file a periodic report, annual or biennial depending on the state, and pay a fee. Fees range from $0 in a handful of states to over $800 in the most expensive ones. The report is usually a one-page form confirming your business address, registered agent, and members haven’t changed. Miss the deadline and you’ll see late fees, then eventually involuntary dissolution.
Recordkeeping
The IRS requires you to keep financial records (receipts, invoices, bank statements, expense logs) as long as they’re needed to support the figures on your tax returns. For employment tax records specifically, the minimum is four years.10Internal Revenue Service. Recordkeeping A reasonable rule: keep everything for at least three years after filing, longer if you claimed a loss or underreported income. A simple folder system, digital or physical, organized by month saves real pain at tax time. Start from day one. Reconstructing records later is miserable.
Taking Full Control at 18
When you reach the age of majority (18 in most states), you gain full capacity to contract and can remove your parent or guardian from the LLC. The handoff has three parts: file an amendment to your Articles of Organization with the Secretary of State, update your EIN responsible party with the IRS using Form 8822-B, and visit your bank to update the account signers. Handle all three within a few weeks of your birthday so there’s no gap in your ability to sign contracts and manage finances on your own.