The Wall Street Journal recently ran an article titled “How to Raise an Entrepreneur.”
One commenter, who owns his own engineering firm, asked:
Nice, but how do you prepare them for the IRS paper, 941’s and 940’s, (withholding and federal unemployment), w-2s and w-3s, (employee reporting and employer reporting for SS and Medi)? Don’t forget the 1120’s (corporate tax filing).
Duplicate ALL of this at the state level and add Business Entity Taxes, Sales and Use tax filing,and filing the annual report with fee. If your S corp is in two states duplicate this for the foreign filings (out of state). Add the agent for the foreign S corp.
Then we get to the insurances. Property and liability, workers comp and if there is any money left, health insurance. and the list goes on, all for a 1-5 person S Corp.
Guess that there was a point in this list and that would be to give our kids a business environment that is conducive to conducting business.
Scott P. (used with permission)
Scott is correct there can be alot of paperwork, IRS forms and state laws for a micro businesses owner to understand.
But it’s not impossible.
My reply to Scott:
How do you prepare them? A little at a time.
I recommend that a teenager start a micro businesses as a sole proprietorship (not a corporation or partnership) with no employees (so no 941s, w-2, etc.) . I also recommend service businesses, not product sales, to (usually) avoid sales tax. If they do want to sell a product, they will learn a lot and apply math skills to calculating the sales tax. It’ll be good for them.
Finally, I recommend they create home-based businesses and I find they can usually get an insurance rider on their parents’ homeowner policy, if needed at all.
If students learn basic business skills as a teenager, they won’t be as overwhelmed when starting a small business as an adult.
I agree with your final comment and I do hope some of these teenagers grow up and try to change the business environment. I’d like to see more small business owners run for public office or influence legislation.
Carol Topp, CPA
Author Micro Business for Teens