Why do so many young people start their own business? Well, they have guts, they are curious, and they are bold. What is more, the internet and social media make it much easier for them to start their own business. In addition, entrepreneurial skills and entrepreneurship is increasingly encouraged at school. Primary schools are even offering dedicated lessons now.
1. From what age can you start a business?
There is no minimum age limit. Anybody can start a business. However, the Dutch Civil Code states that minors are only allowed to perform legal actions with the permission of their legal representatives. This means that any action performed by a minor is only legal if the parent or guardian has given permission.
2. How to get permission for actions
There are many day-to-day situations that are suitable for minors. In these situations the minor does not need permission for an action, because the action is age-appropriate. For example, buying a sandwich at school or buying clothes. But it is a different story if a minor wants to take out a mobile subscription or borrow money from a bank. The law aims to protect minors against impulsive actions. That is why you, being the parent or guardian, can reverse these actions.
3. What is limited legal capacity (handlichting)?
A minor who has reached the age of 16 or 17 can ask the court to be granted limited legal capacity (handlichting). By granting limited legal capacity, a judge declares a minor a person of age. This means that the law will treat the minor as an 18-year-old adult. This applies only to actions necessary for the business, not to the minor’s private life.
If your child does not have limited legal capacity, they must ask you for permission in all legal actions they perform. Limited legal capacity bypasses this requirement. When a young person is granted limited legal capacity, they can sign for everything themselves.
Limited legal capacity is not compulsory, but it does offer advantages and certainties. Your child can apply for limited legal capacity at the District Court (in Dutch) that is nearest to where you live. Of course, your permission for this application is required. The costs for applying for limited legal capacity range from €1,000 to €1,500.
4. How to deal with compulsory education
It is up to the parents and their children to make arrangements with the school. An increasing number of schools are quite flexible in their programme for entrepreneurial children. They offer services such as specific arrangements for exams, the possibility of catching up on missed schoolwork, or exemptions. The school board will look at your child’s behaviour, their test results, and their commitment to the arrangements you agreed on.
5. What is the parents’ responsibility?
You, meaning the parent or guardian, are responsible for the actions of your minor. Is your child running up a debt? Then you are the one who is financially responsible. You can cover this risk by taking out business insurance, for instance. We have listed the 10 most important insurance policies. Obviously, your responsibility will change the moment your child is granted limited legal capacity.
Please note: Online fraudsters target young entrepreneurs as well. They want to take advantage or try to make some money off them. Discuss online scams with your child and take the necessary precautions, where possible.
6. How to register with KVK
If a minor wants to register with KVK, they need limited legal capacity. If your child does not have limited legal capacity, we will ask you to accompany them to the KVK appointment. After registering, KVK will pass on your details to the Tax and Customs Administration. The Tax and Customs Administration will then send your VAT identification number and turnover tax number by post within 14 days.
7. Does my child have to pay taxes?
Minors who make a profit have a source of income. The Tax and Customs Administration will probably consider them an entrepreneur for income tax purposes. This means that your child must pay taxes over the profit of their business. They must file their own income tax return. Your child will also receive a tax assessment for the income-dependent contribution for healthcare insurance as stated in the Netherlands Healthcare Insurance Act (zorgverzekeringswet, zvw).
Your child’s tax return will also affect your tax return. You will be taxed through Box 3 (taxable income from savings and investments) for your child’s allowance.
8. Consequences for child benefits, student grants and loans, and housing benefit
What your child earns with their own business does not have any consequences for the child benefit you receive. However, it does affect their student grants and loans. If your child falls under the new system for student grants and loans (in Dutch) and is enrolled in secondary education, higher professional education (HBO), or university, it does not matter how much they earn.
If the old system for student grants and loans applies, or if your child attends senior secondary vocational education (MBO), the additional income limit is €15,415.63 in 2021. This applies to your total income or taxable wage.
In the calendar year that your child graduates, the profits from business activities will not be counted towards their income limit. There is one condition; your child must graduate in that calendar year. For more details, visit the website (in Dutch) of the Education Executive Agency (Dienst Uitvoering Onderwijs, DUO).
If you have children living at home who were under the age of 23 on 1 January 2021, the first €5,044 of their income (in Dutch) will not be counted towards your housing benefit. You are required to declare the annual income of your children to the Tax And Customs Administration.
9. Consequences for your welfare benefit
If your child is under the age of 18, there is no limit to their additional earnings from their business. Their earnings will not be deducted from your welfare benefit. However, your benefit may change. If your child is aged 21 or older, your benefit might be lowered (in Dutch). This is because the municipality will regard your child as a housemate. Please contact your municipality for information about what impacts the amount of your welfare benefit.
10. What legal structure should you choose?
Is your child planning to officially register their business with KVK? If so, then first they need to choose a legal structure for their business. Most young people start a sole proprietorship (eenmanszaak) or a commercial or general partnership (vennootschap onder firma, vof). These legal structures have the advantage that they are quick and easy to set up. Your child does not have to go to the notary to make it official either. The drawback is that your child will be personally liable for the debts of the business.
Together with your child, explore the risks involved and take out an insurance for the ones that you do not want to carry or that you cannot carry.
11. How to open a business account
It can be difficult for a minor to open a business account with a bank. But the good news is, it is not impossible. For more information on which banks might allow your child to open a business account if they are under 18, read this article (in Dutch).