When to Create a Corporation for Your Child’s Business
My first foray into entrepreneurship was a retail business selling designer sunglasses, windproof lighters, and just about any other $10-$100 items I could get my hands on back in the early 1990’s. Before the internet, there was a special telephone book (like the yellow pages) with thousands of pages of distributors organized by the products they distributed that I found on my mother’s desk (my parents were no strangers to business ownership; my father ran a camera store for years and my mother owned an interior design business).
While my sales to friends and classmates of discount wares never really amounted to more than extra pocket change, children today have access to the internet and all the information, manufacturing sources, and online retail outlets in the world. The youth today are making money in ways older generations can hardly image (I include myself in that as well!) promoting products on social media, creating virtual products within video games, and building apps for just about everything.
Whether your young entrepreneur is running a more traditional business operation, like online retail sales, or is engaged in an enterprise you hardly understand, here are some reasons why you should consider creating a formal legal structure for the business of a child:
Make a College Applications Unique
Getting into the best university or graduate school is getting more and more competitive every year. While stellar grades and test scores are required, every college applicant needs extra-curricular activities that stand out from the crowd. Choosing to formalize a legal business structure adds a lot of legitimacy to your child’s business. Including something like “…at 16 years old I founded XYZ, Inc., a successful digital marketing agency…” sounds a lot more impressive than “I worked for my parent’s business doing social media marketing,” on a college application.
Set Them Up for Success
Setting up a formal structure for your child’s business brings legitimacy to the business itself and protects them from the legal liabilities of operating the business. Whether forging relationships with vendors or acquiring new customers, your child will likely enjoy more success with a legal structure than as a young sole proprietor. Having a business license, business bank account, proper financials, and even tax advantages not only helps the business, but also teaches your son or daughter how business actually works, which sets them up for future success in larger endeavors.
Shielding Parental Assets
For entrepreneurs who have yet to reach eighteen years of age, operating in a formal legal structure may provide limitations on liability protecting your assets from financial and legal liabilities arising out of your child’s business which would otherwise pass to you, the parent.
Call San Diego Corporate Law Today
If you want more information, call experienced corporate attorney Michael J. Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can set up a company for you or your children. Mr. Leonard has been named a “Rising Star” for 2015, 2016 and 2017 by SuperLawyers. Call Mr. Leonard at (858) 483-9200 or contact him via email.