Businesses for kids are cropping up all over. Before your child actually starts a business, make sure that liability issues won't surprise you. No matter what age you are when you start a business, laws need to be followed to avoid any possible problems that might arise.
Get in the Zone
Local zoning regulations must be followed, especially if your child's business is based in your home. Check with city officials to determine if your child's business can legally operate from your home. If not, your child may need to acquire a permit to operate the business. Since your child is under age, you will have to apply for any necessary permits on her behalf.
Failure to comply with local zoning regulations can result in hefty fines.
Insurance Assurance
Ask your insurance agent if your homeowner's policy will cover your child's at-home business. Liability coverage may need to be added to your existing policy. Insurance companies may recommend that you purchase separate business insurance to cover your youngster's entrepreneurship.
Failure to purchase adequate insurance could result in major property loss for you.
Limited Liability
Parents may not want to dish out money to form a corporation for their child's business. Honestly, your 15-year-old daughter's pet sitting business probably doesn't need to become a corporation. If the business is profitable, you may consider organizing the business as a Limited Liability Company (LLC). Each state has its own rules governing the establishment of a LLC. The benefit is that your child has the same personal liability protection that a corporation offers, but money matters are taxed as a partnership.
Prior to starting any new endeavor, parents, along with their children, should discuss the potential drawbacks, the start-up costs, and positive aspects. Covering all areas reduces the chance of a liability issue.
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