The need for financial security knows no age limit. With proper adherence to set guidelines, teenagers can find legitimate ways to make money in the digital market and shield themselves from financial fraud and legal troubles.
In this piece, we will try to understand and dissect the legalities surrounding teenagers venturing into dropshipping and the additional requirements teen dropshipping business owners need to put in place that a grown-up would not need to have.
Let’s start with answering this question:
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Is It Legal To Do Dropshipping As A Teen?
The simple answer is that teens can start and own dropshipping businesses, but there’s more to it.
First:
Age is one of the prerequisites of a legally binding contract. In most legal jurisdictions around the world, that mostly rounds off to a minimum of 18 years of age. Based on this legal requirement, actions taken by the individual contrary to the agreed-upon guidelines warrant prosecution.
Fortunately, there is some wiggle room to this:
To own a legal dropshipping business as a teen, you can get a trusted adult to cosign for you or borrow someone’s identity with their consent. This can allow you to start a legal dropshipping business as a teen by ensuring you present a “legal face,” thereby boosting your business’s trust score and credibility.
Steps to Starting A Dropshipping Business As A Teen
Here are the requirements teens need to sort out before venturing into the dropshipping business:
1: Legal compliance
As a teen entrepreneur, one key thing to note about starting any business—including a dropshipping business—is that most jurisdictions have rules around it. For example, some states and countries have rules dictating at what age someone can form a legal entity, open a legal bank account, etc.
Therefore, your first step will be determining your local area’s statutory regulations about owning a legal business.
Fortunately, even if your local area, state, or country does not allow teenagers to form or own a legal business entity, you can get a parent or guardian to act as your authorized signer, especially if you want to start an LLC.
This step is important because while it is technically possible for teens and minors—anyone not under the legal “adult” age—to sign contracts, most business entities, including banks and dropshipping suppliers, shy away from such practices.
Most even consider teens “lacking the legal competency” to enter into legally binding contracts and can easily “disaffirm” the contract.
Additionally, getting a parent or legal guardian to set up your legal business is important because it means your business can get a legal bank account —and card, perhaps even one linked to a parent’s bank account. This is important because you will use the card to pay your suppliers and manage the business’s finances.
When applying for a bank card, it is essential to pay attention to legal age requirements, which, for most banks, is 13 onwards—but this differs from bank to bank, so check with your local bank.
Even before you start looking for dropshipping suppliers or set up your online store, take care of the legalities because, depending on your business structure, types of products, and other factors, you will need to comply with various legal requirements like:
- Getting legally registered as a business
- Filling tax returns and paying taxes —in the US, you have to pay taxes if you earn $400 or more
- Renewing business licenses and permits —yes, even teen businesses need state and sometimes federal licenses and permits,
Why a business permit is necessary
It is illegal to operate a business without a permit since you must file taxes and meet other legal obligations.
Obtaining a license varies from region to region, and you will still need an adult’s details to proceed. Mostly, the revenue department requires bank information and an ID. Having a permit further legitimizes your store and gives you additional credibility. It can also help in taking full advantage of tax write-offs.
With the legalities checked off your list, you can then move on to the next step:
2: Setting up an online store
There are two ways to go about this;
a: Purchasing a domain name
For most online businesses, a website is a necessity. This requires you to pay for a domain name and hosting rights. There are no age restrictions to purchasing a domain, and anyone can buy it.
Generally, you will need a credit card to purchase a domain name—this is why it is important to get the legal aspects right first. You can consult a parent or guardian and use their card —or a prepaid card attached to their bank account—to purchase the domain name.
When picking a domain name, go for something catchy reflective of your dropshipping business brand. If your preferred domain name is unavailable, get creative —you can even use Shopify’s domain name generator to brainstorm some ideas.
b: Sign up on a dropshipping platform (Shopify is the best option)
There are many platforms specifically designed to make the drop shipping experience easier for users without incurring the cost of getting a website.
They include Shopify, BigCommerce, WooCommerce, Wix, and Magento, to name a few.
Most of these dropshipping platforms are not very friendly to underage entrepreneurs, and some even go as far as restricting teens and minors from their platforms.
For example, Shopify, one of the most convenient dropshipping platforms, doesn’t allow teens or minors to conduct business on their platform. Therefore, to create a Shopify store for your dropshipping business as a teen, you will need a parent to sign up for you—this cements the importance of step 1: dealing with the legalities first.
When deciding whose name to sign up with on Shopify and other such platforms —only necessary if your parents or guardians haven’t helped you set up a legal business for dropshipping as a teen—consider things like:
i: Trustworthiness
Before you set up the account, consider the legality that the account will belong to the owner of the documents. That means they can easily switch up on you and face no repercussions. Thus, pick somebody you trust to keep their word, even when the profits start coming in.
ii: Taxes
It’s important to note that since this is a form of income stream, it will affect the individual’s tax bracket.
To avoid putting them in such a situation, consider someone who doesn’t have to pay tax, perhaps a grandparent above the taxation bracket.
iii: Debt situation
Consider the person’s debt situation because once the money is in their account, the banks could deduct loan premiums without considering you as the teen owner of the dropshipping business generating the income —after all, the bank account is in the person’s name.
3: Payment Gateways
A payment gateway is a system that facilitates the process of reading and transferring payments to a bank account after a successful business transaction between a merchant and a buyer. This system captures the client’s data depending on the mode of payment presented, confirms the presence of funds, then initiates the payment.
An effective payment gateway platform must have the following key stakeholders:
- Merchant: This is the person or the platform providing the products. In this case, this is your dropshipping store.
- Cardholder: The client placing the order
- Issuing Bank: This is the bank that holds the client’s account. This could connect to either their debit or credit card.
- Card Schemes: These are the credit card companies that the buyer owns. They include Visa, MasterCard, and American Express.
- Acquiring bank: This bank account belongs to the merchant —your bank account.
Here is a breakdown of how a payment gateway works —to help you understand the behind-the-scenes transactional element of a dropshipping business as a teen:
- The cardholder selects products, adds them to their cart, then initiates the purchase by clicking on the “buy now” or checkout button on your store.
- The payment gateway verifies whether the issuing bank has sufficient funds or if the credit card allows a limit equal to or more than the total cost of products.
- Next, the gateway sends encrypted card information to the card scheme to follow up on the completion of the transaction.
- The card scheme approves the transaction and sends the information back to the merchant’s store, showing a completed transaction.
- The payment gateway then sends the information to the merchant’s bank to acquire funds from the client’s bank.
When choosing a payment gateway, consider whether it is;
- Available: In both your country and your potential clients.
- Secure: End-to-end encryption to keep both parties’ information safe from fraudsters.
- Integratable: Does it seamlessly mesh with your platform or financial software?
- Compatible: Does it cover your needs and the client’s needs?
Here are some popular gateway payment systems you can use as a teen dropshipping business owner, including how their operations differ:
1: PayPal
This is the most widely used payment gateway and is accepted in over 203 countries worldwide. PayPal supports most card schemes.
To acquire a PayPal account, you have to be of legal age. Thus, as a teen, you need to ask someone of legal age to open it for you.
2: Stripe
Stripe is a US-based payment gateway currently available in over 20 countries. It’s user friendly for a beginner—offering Woo Commerce integration,
It’s suitable for merchants who have set up shops on the Facebook market. This method is suitable for teens since it allows you to get an account as long as you are 13 years and above.
3: Authorize.net
This gateway platform is available in over 30 countries and is one of the oldest and most trusted providers. However, it has an age restriction of over 18 years. Therefore, as a teen dropshipping business owner, you will need an adult to set up your account.
Authorize.net has additional features that allow easy integration with Woo Commerce stores. It offers some of the best transaction fees rates of about 2.9% +$0.30 for online stores and dropshippers.
4: Skrill
Skrill is available in over 40 countries across the globe. It has a checkout transfer fee of 1.9%. It also has the extension channel for WooCommerce and a minimum age requirement of 18 years—meaning you will need an adult to set it up for you.
Before using Skrill, you have to submit your documents, including a credit card, ID, and bank statements, for verification to lift and avoid account limitations.
5: Shopify
Shopify bypasses the need to use a third-party payment processor and allows prompt payment in one click —that’s why it’s one of the best platforms to use. It helps make payment convenient for customers.
Shopify accepts all popular card schemes and other popular payment methods like Google Pay and Apple Pay and enhanced security by ensuring discretion while making payments through encryption. It gives a sense of control by making it possible to track orders and payments in one place.
Shopify also offers a 14-day free trial if you intend to start your dropshipping venture. The pricing starts at 2.9% +$0.3.
4: Product sourcing
Once your store is ready, with all the legal requirements met, the next step is to source products.
Here, you can use platforms like:
- Alibaba
- AliExpress
- 1688
- SaleHoo
- Taobao, etc.
Alternatively, you can work with a professional dropshipping sourcing and fulfillment agency like BestFulfill.
Working with a professional dropshipping sourcing and fulfillment agent has many benefits like product sourcing from Chinese suppliers, product inspection, warehousing, product/package branding, branded gift cards, and dropshipping order fulfillment. Such dropshipping services are affordable and could make it easier to run your dropshipping business as a teen.
5: Marketing
Marketing is the final step of running a dropshipping business as a teen. The modern age has various teen-friendly approaches you can use to market your dropshipping business. These include:
- Social media: Decide who your target audience is and focus on the social media platforms they use the most. There is Facebook, Instagram, YouTube, and Twitter. These platforms also offer paid ads whereby the platform helps push your product to a larger and more diverse group of people.
- Email marketing: One way to take advantage of email is to encourage people to subscribe to your emails so that they don’t miss out on offers or products.
- Retargeting: This targets people who visit your website with the intention of buying or even window shopping. Once they leave the site, the ads keep popping up as they surf the net, which keeps the idea of your brand active in their minds. Eventually, most of these visitors convert into clients.
- SEO: Search engine optimization allows your website to appear first on Google when clients are looking for products you might have available. It’s best to engage an SEO specialist.
It’s best to keep trying all the marketing strategies available while taking notes and comparing the conversion rates. After experimenting, you can eventually decide which method best works to fulfill your needs. Remember to keep adapting as your business grows.
Conclusion
The reality is that teens can own dropshipping businesses.
However, since minors lack the “legal competency” to enter into legally binding agreements, teens, whether 14, 15, 16, or 17, need to have parents set up a legal business on their behalf.
Once the legalities are in place, teens can run their dropshipping businesses the same way adults do.
