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I recently turned 13 and I have an eBay business that is growing quickly. I have about a 5-6k net worth of merchandise (I just bought a huge order). I predict that I will have 100k by the end of next year at the current rate of sales.

I wonder if anyone has any ideas of what to do when you are starting out. Please tell me how I can be smart/safe without being too risky. Also, could you let me know if there is less tax for minors who are sellers?

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  • 6
    Whereabouts are you based (country / state etc)? Tax rules vary widely around the world. – Vicky Sep 13 at 20:40
  • 3
    This isn't about personal finance anymore. – chepner Sep 13 at 21:57
  • In most countries there is no exclusion from tax for minors, and I'm not aware of any that have reduced tax rates based on youth but I could be wrong (thus the need for a location tag). You'll want to make sure you keep receipts for all of your business purchases as you will want to ensure you can be taxed against your profits (income - expenses) rather than against your gross income (all the money you get as if you had no expenses). In terms of online business, be aware that trends change and competitors arise so what is selling well now might not be within a few months, etc. – BrianH Sep 13 at 23:07
  • 3
    @chepner Small sole proprietorship, no employees. Yes, this is Personal Finance. – Ben Miller Sep 14 at 2:56
  • In Australia, minors pay more tax than adults by default. – Lawrence Sep 14 at 7:08
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I predict that I will have 100k by the end of next year at the current rate of sales.

And you do not assume that you need an accountant which would explain that to you? Btw., depending on jurisdiction you may also need a LOT of paperwork from your legal guardians because a 100k merchandise operation is not pocket money, and you may or may not be of legal age.

Also, could you let me know if there is less tax for minors who are sellers?

Why would the government make special provisions in it's laws for minors? Because either rarely any minor runs a successfull buyiness (hint: that is the case) then none does even THINK about putting in special cases. Or TONS of them do - then how stupid would it be to tax them less?

General rule is that taxation is per person, regardless of age. Minors normally do not pay taxes due to not having enough income to do so.

I wonder if anyone has any ideas of what to do when you are starting out.

Yes. Get professional advice. Fast. Taxes are tricky - making something wrong means you pay fines, and that is pretty much regardless of age. Also you want arms length - if a paid accountant makes a mistake, you are not at fault and can proove it, which is relevant for possibly criminal isues - and his insurance will cover the damage. I once had an accountant (that we sort of bankrupted) that had to go to the government and correct his accounting for 2 years. The fines where not funny - his insurance totally did not like it. Closed shop closely after. Point is - if it would be me, they would ahve doubts about my ability to run a business and it would possibly have criminal consequences (failure to keep proper business documents in order). With the accountant it was "arms length". I pay a chartered accountant, I can assume he is competent.

You likely will find out pretty much that 100k in merchandise is not a lot. Unless you make a LOT of margin (difference between sales price and purchase cost, in simple terms) there is not a lot of money left once you restock that is actually a profit.

  • While being able to show that you relied on an accountant is of some worth, one shouldn't rely totally on that. If the accountant isn't cooperative, you could have to sue them for the money. And if they don't have insurance (and they may say they do when they don't), then there might not be any money even if you win. – Acccumulation yesterday
  • @Acccumulation I don't think the answer ever implied that the accountant should have access to the money, only that he would provide advice and assistance on the necessary paperwork. – chepner yesterday
  • "If the accountant isn't cooperative, you could have to sue them for the money" - seriously? No? I work with charterered accountants and ensuring they have professional liability insurance is my ground work. Insurance is legally mandated here. – TomTom yesterday
  • @chepner I'm not sure what you're responding to. The answer is saying that if you are assessed penalties based on the accountant's mistakes, then you'll be able to get reimbursed by the accountant. I'm saying that getting that reimbursement may require legal action. – Acccumulation yesterday
  • @TomTom Preparing tax returns correctly is also legally mandated. If we're contemplating a situation where an accountant has breached one of their duties, why assume that they have complied with their others? Checking up on an accountant to make sure they are properly chartered and insured is not a trivial task even for an adult. – Acccumulation yesterday

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