Madison Jane Thomas sells unique gifts in her Etsy shop MadisonJanesLane.

Thirteen-year-old Jody Gibbs is an avid crafter. She loves painting with acrylics and sewing bags. Now Jody would like to set up an Etsy shop to start selling her work.

“I’m starting to sew more clothes and I’ve started working more with Perler ® beads to create some character-inspired pieces, too,” Gibbs says. “Etsy is a good platform to sell on because it has a large audience base and most customers looking for handmade items will look there first.”

She has admirable ambitions for going into business at such a young age.

Gibbs certainly isn’t the only kid with dreams of selling their handmade wares to earn extra money. Many adults with creative businesses recall getting their start as entrepreneurs by selling their handmade goods to friends at school. With the advent of online marketplaces like Etsy, though, young people now have the opportunity to easily reach a global customer base for their goods.

Gibbs’ mother, Larissa Gibbs, wants to encourage her daughter’s creativity and budding entrepreneurial spirit, but says she has some reservations about allowing her daughter to start an Etsy business: “Jody has always been creative, but really started showing an interest in selling her own items when I opened my first Etsy shop in 2007,” Gibbs recalls. “Since she was only 5-years-old, I told her she had to wait until she was a bit older. She has asked a few times over the years, and each time, I have really tried to explain to her how saturated the market is, and that I would like her to hone her skills a bit more. I’m not totally opposed to the idea, but feel like we both need to really do some research still.”

If Jody were to move forward with her craft business, she would need her parents’ help. According to Etsy’s terms of service, “individuals under the age of 18 are considered minors on Etsy. Minors must have a parent or legal guardian manage their Etsy accounts. Additionally, those under the age of 18 may not use Etsy’s community features under any circumstances.”

In addition, all financial information affiliated with the Etsy account, such as a credit card or a PayPal account, must belong to a parent or guardian. Minors must also disclose in their profile and “About” page that their parent oversees their Etsy account. The parent or guardian must write to trust@etsy.com with a statement of permission using the subject line “Parent/Guardian of [Etsy username] wishes to activate account.”

Before she allows her daughter to proceed with her Etsy business, the elder Gibbs says she feels like she’d need to better understand the financial and legal requirement of having a child who has a business: “I feel like we are lacking the knowledge of having a minor that is making money, and how to keep track of her supplies and what comes in separate from either our household finances or my business stuff.”

If you already own a small business and your child would like to begin selling crafts on Etsy or elsewhere, attorney Josh Barrett says it’s acceptable to run their business under the same umbrella entity as yours. If one business were to become very big or present a very different type of risk, however, you would want to consider separating the two so that a problem with one wouldn’t jeopardize the assets of the other. Also, if in the future one of the two businesses was to take on investors, the entities should be separated so that those relationships don’t get entangled, Barrett says.

When it comes to tracking finances, Barrett recommends opening a separate bank account for the child’s business.

“Keep things separate. From an educational point of view this supports doing a little bit of profitability and margin analysis,” he says. “I don’t think you need a full chart of accounts for a simple kid business, but to start with, why not just keep track of sales and cost of goods sold. That’s the basics for figuring margin and profitability right there. As it gets bigger, a more detailed chart of account might be needed if this is really a growing business versus an educational endeavor.”

A child has to file a separate tax return if they have “earned income,” or money earned from working, of $6,300 or more in a year. However, if a child has both earned and “unearned income,” or income earned by investments, it gets more complex. (Get more information here: http://www.nolo.com/legal-encyclopedia/when-does-your-child-have-file-tax-return.html)

Thomas says the experience has helped her learn some accounting fundamentals: “Every week my finances are sent to my dad’s bank account, and then at the end of the month we count up how much money I made. For my finances, I have an envelope system, where I budget for different goals. I manage my profit and loss in a spreadsheet.“

She’s also had to face some business realities when it comes to marketing.

“The only stressful moments are when you are not getting any sales and need to try new ideas,” Thomas says.

Last year, she worked with two of her uncles to create a YouTube commercial for her Etsy shop. That video has been viewed 416 times.

Selling handmade goods on Etsy can help young people learn valuable skills that could serve them well as they transition into adulthood. Gibbs’ mom, Larissa, says she hopes this will be the case for her daughter: “I think she [will] gain confidence in her abilities. She [will] learn that not everyone will have the same tastes as her, so customer service and how to react to criticism will be a big learning curve.”

She adds: “I hope she’ll learn to put value on her product based on her supplies and her time spent on a project rather than saying ‘it’s a small painting and I barely used any paint, so I will sell it for $2,’ when it also took her two to three hours to get it just right.”

Do you have an Etsy shop? Craft Industry Alliance members get access to our exclusive webinar with Etsy expert, Sarah Sewell. Learn how to optimize your shop for traffic, clicks, and sales.