You can legally start an online business as a teen in the United States, but a parent or guardian has to be involved at nearly every step: signing formation documents, sitting on the bank account, appearing as the responsible party on your tax paperwork, and often owning the payment processor account that receives your money. The law treats most contracts signed by a minor as voidable, so banks, platforms, and suppliers won’t deal with someone under eighteen alone. Once you accept that structure, the rest of the setup is a sequence of concrete filings and account decisions.
Why a Parent or Guardian Has to Sign
A legal principle called the infancy doctrine lets minors cancel most contracts before reaching adulthood, and in some cases shortly after.1Legal Information Institute (LII) / Cornell Law School. Infancy – Civil Law A web host, wholesale supplier, bank, or software vendor has no reliable way to hold you to your end of a deal. So they refuse your application or require an adult co-signer. When your parent signs, they become the legally bound party, which is what the other side needs to move forward.
This shows up in five places: your formation documents, your bank account, your payment processor, the platform terms of service you agree to, and your tax filings. Plan for adult involvement at each one from the start rather than hitting the wall halfway through.
Choosing Between a Sole Proprietorship and an LLC
A sole proprietorship is the default. If you start selling without filing anything, you’re already operating as one. The only paperwork is a possible trade name registration if you want to sell under a name that isn’t your legal name. The catch is that your personal assets and business obligations aren’t legally separated, so debts or legal claims can reach your (and your parent’s) personal finances.2U.S. Small Business Administration. Choose a Business Structure
A limited liability company puts a wall between personal and business finances. If the business is sued or owes money, your personal savings are generally protected. Forming an LLC means filing with your state’s Secretary of State and paying a filing fee, and because you’re under eighteen, your parent or guardian will likely need to be listed as a member or manager on the formation documents.
For most teen businesses, starting as a sole proprietor while sales are small makes sense. Once you’re holding real inventory or generating meaningful revenue, converting to an LLC becomes worth the paperwork.
Registering With the State
LLC formation and trade name registrations both go through your state’s business registry, usually the Secretary of State office. Most states have an online portal for name searches, formation filings, and fee payment.3U.S. Small Business Administration. Launch Your Business
Have this ready before you start the application:
- A business name confirmed available in your state’s database. LLC names generally must include “LLC” or “Limited Liability Company.”
- A registered agent with a physical street address in your state, not a P.O. box. A parent can serve, or you can hire a commercial service.
- Full legal names, addresses, and ownership percentages for every member. Since you’re a minor, your parent’s information will appear on the documents as a member, manager, or authorized signer.
- The filing fee, which ranges roughly from $35 to $500 for an LLC depending on the state. Check the exact amount on the portal, because an incorrect payment can bounce the entire application.
For an LLC, the main document is usually called the Articles of Organization. For a sole proprietorship using a name other than your legal name, you’ll file a trade name registration, sometimes labeled a DBA. Online filings typically clear faster than mailed applications.
Getting an EIN From the IRS
An Employer Identification Number is a federal tax ID that works like a Social Security number for your business. You need one to open a business bank account, file business tax returns, and hire anyone later. The IRS issues EINs at no cost through an online application on irs.gov.4Internal Revenue Service. Employer Identification Number
The application asks you to name a “responsible party,” meaning the individual who ultimately owns or controls the entity. That person has to provide a Social Security number or individual taxpayer ID, and must be a real person rather than another business.5Internal Revenue Service. Instructions for Form SS-4 For a teen-owned business, this is almost always your parent or guardian. Keep the confirmation letter somewhere safe; banks, payment processors, and state tax agencies will all ask for it.
Federal Taxes You’ll Actually Owe
Running your own business creates tax obligations a regular part-time job doesn’t. No one is withholding anything, and the thresholds for filing are lower than most teens expect.
The $400 Rule
If your net self-employment earnings reach $400 or more in a year, you must file a federal tax return and pay self-employment tax, regardless of whether you owe any income tax.6Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) That’s the number that matters. Even if you’re claimed as a dependent on your parent’s return and your total income is otherwise below the filing threshold, $400 in net business profit triggers the return.
For income tax purposes, a single dependent under 65 must file when gross income exceeds the greater of $1,350 or their earned income plus $450, up to the standard deduction of $16,100 for 2026. For most teen businesses the self-employment threshold hits first.
Self-Employment Tax
Self-employment tax covers the Social Security and Medicare contributions an employer would normally split with you. Since you’re both, you pay the full 15.3%: 12.4% for Social Security on net earnings up to $184,500 in 2026, and 2.9% for Medicare on all net earnings with no cap.7Social Security Administration. Contribution and Benefit Base You report this on Schedule SE attached to Form 1040.
The math can sting. A $5,000 profit means roughly $765 in self-employment tax alone, before any income tax. Setting aside 25–30% of profit as it comes in is a reasonable cushion.
Quarterly Estimated Payments
If you expect to owe $1,000 or more in total federal tax for the year, the IRS wants quarterly estimated payments rather than a lump sum in April.8Internal Revenue Service. Estimated Taxes For 2026, the deadlines are April 15, June 15, September 15, and January 15, 2027.9Internal Revenue Service. 2026 Form 1040-ES – Estimated Tax for Individuals Missing them can trigger an underpayment penalty. In your first year, without a prior-year tax liability to base estimates on, the safest approach is paying 90% of your current-year tax across the four quarters.
Sales Tax if You Sell Physical Products
If your business ships physical goods and your home state has a sales tax, you need a seller’s permit (sometimes called a sales tax permit) from that state before your first sale. The permit authorizes you to collect sales tax from customers and remit it on a set schedule. Applications are usually free, and operating without one when required can produce penalties and back taxes.
Multi-state collection is the less obvious piece. Since a 2018 Supreme Court decision, states can require remote sellers to collect their sales tax even without a physical presence, most commonly once a seller passes $100,000 in sales or 200 transactions into that state in a year, though some states have dropped the transaction test. Most teen businesses won’t cross those lines quickly. Selling through Etsy or Amazon shifts most of that collection and remittance onto the marketplace in most states, which is one real advantage over running your own standalone site.
Opening a Business Bank Account
Keeping business money separate from personal money isn’t optional if you want your LLC’s liability protection to hold. Sole proprietors benefit too, because clean records make tax season much easier.
Most banks require a parent or guardian as joint owner or custodian on any account held by someone under eighteen. Rules vary by bank. Some let teens as young as thirteen open a joint checking account with a parent; others require the parent as primary account holder. Bring your EIN confirmation, your formation documents, and government-issued IDs for both of you.
Payment Processors and Selling Platforms
Age restrictions on payment processors and marketplaces are the most practical barriers a teen entrepreneur hits, and platforms enforce them.
Payment Processors
Stripe lets users as young as thirteen create an account, but a legal guardian must be added as the account owner before the account can accept charges or transfer funds to a bank. Stripe collects the guardian’s name, date of birth, Social Security number, and address during that step.10Stripe: Help & Support. Age Requirement to Create a Stripe Account
PayPal requires all account holders to be at least eighteen or the age of majority in their state.11PayPal. PayPal User Agreement Square has the same eighteen-and-over rule. For both, the workaround is your parent opening the account in their own name, with the revenue flowing through their account. That means bookkeeping has to clearly show the income belongs to your business, not theirs.
Marketplaces and Store Platforms
Etsy requires the account owner to be at least eighteen, but minors aged thirteen and older can use the platform under a parent’s direct supervision. The parent has to be the account owner, and all billing and payment details must belong to the parent or guardian.12Etsy. Minors Policy That’s one of the friendlier setups for a teen seller.
Shopify requires all account holders to be at least eighteen with no minor-supervision exception in its terms.13Shopify. Terms of Service If you want a Shopify store, your parent has to be the account holder. Read the terms of service for any platform before committing; an account shut down mid-operation can freeze funds and lose customers.
A Boundary: COPPA Only Applies if You Collect Data From Kids Under Thirteen
The Children’s Online Privacy Protection Act applies to websites and online services that collect personal information from children under thirteen, either because the service is directed at that age group or because you have actual knowledge you’re collecting from them. It applies regardless of your own age.14Federal Trade Commission. Complying with COPPA: Frequently Asked Questions If you’re selling handmade goods, digital products, or services to peers and older, COPPA typically isn’t in play. If you’re building an app or site that could attract younger users, look at the rule before launch. Civil penalties exceeded $53,000 per violation as of 2025 and adjust for inflation each year.
Keeping the Business in Good Standing
Registration isn’t a one-time event. Most states require LLCs to file an annual or biennial report with the Secretary of State to stay in good standing, updating information like the business address and registered agent. Fees vary from nothing to several hundred dollars. Missing the deadline can trigger late fees or administrative dissolution, which revokes your LLC’s legal existence until you cure it.
Local requirements matter too. If your city or county requires a general business license or a home occupation permit for home-based businesses, those usually renew annually. Check with your city or county clerk’s office for specifics.
On taxes, expect a federal return every year your net earnings exceed $400, quarterly estimated payments if your liability crosses the threshold, and state sales tax returns on whatever schedule the state assigns based on your volume. Calendar reminders for each deadline are the simplest way to keep penalties from eating into profit.