Small Business

Lemonade war: 3 legal issues with your kid's small biz

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If there is one thing that is synonymous with summertime, it's lemonade.

Children strapped for cash hang up paper signs and pass out plastic cups to neighbors in hopes of making a little cash. It's a tradition that's spanned generations and has, in recent years, grabbed national headlines for something not so sweet.

More and more in the last decade police and local code enforcement officials have closed lemonade stands when kids and parents were unable to produce proper permits and health department licenses. (Tweet this).

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This summer, Overton, Texas made news when sisters Zoey and Andria Green had their lemonade stand shut down by local police. Despite negotiations and an officer waiving the $150 city permit fee, the burgeoning business remained closed because of state regulations on refrigerated beverages.

Google Map courtesy of David Roland, director of litigation and co-founder of the Freedom Center of Missouri.

The Green sisters are by no means the only youngins to face a crackdown by local officials. Pint-sized entrepreneurs all over the United States have seen their summer businesses sour.

So, before helping to set up those lawn chairs and beach umbrellas, take a look at three legal issues that could stand in the way of your kid's business success:

1. Permits

To operate a lemonade stand lawfully, your entrepreneur may need to apply for a vendor permit with your town or state.

A similar license from the Department of Consumer and Regulatory Affairs will run $388 for two years. However, there is a $70 application fee and a $25 endorsement fee. So, this paperwork alone will set your lemonade mogul back almost $500, even before they factor in the cost of citrus fruits and plastic cups.

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There are, of course, some towns and officials who are more lenient and do not require these permits. Greg Rice, the planning & development director for the city of Dunedin, Florida, chose not to shut down 12-year-old T.J. Guerrero's lemonade stand last summer.

"Can someone not mow someone's lawn for cash? Walk a dog? Babysit?" Rice asked. "We looked at it as one of those areas that are very common for all of us when we are growing up... and making sure it was wasn't causing a nuisance in the community."

From his perspecitve, adults and even older teens, have other opportunities for employment and there was no need to close down a stand that wasn't causing traffic problems or disrupting the local community. In fact, police polled the neighborhood and only one resident took issue with the small business—the guy who lodged the initial complaint with local authorities.

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2. Public health

A 7 year old in Oregon folded her stand in 2010 because of concerns from a county health official about public safety and sanitation. In order to comply with the local health codes she would have had to purchase a $120 temporary restaurant license.

The fee for this type permit varies by state and town. In New York, a one-year permit costs $70, but businesses must also pay $114 for a food protection course and another $25 if they're selling frozen desserts.

In Mississippi, however, food permits costs are associated with risk factors. The higher the likelihood that a food-borne illness, the higher the fee. The lowest risk level costs $30 annually, while the highest will run you $200.

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There is a loophole for this permit, however. Many states have some variation of a cottage food law that allows relatively safe foods to be sold without special permitting.

But even those laws can be quite restrictive. Forget about foods that need refrigeration, and everything needs a clear label. Cottage food laws don't allow for Internet sales or stocking your local grocer with your grandmother's brownies.

3. Zoning and local ordinances

In conjunction with business permits, your lemonade entrepreneur needs to adhere to local ordinances concerning zoning and traffic. Some towns have laws restricting the location of temporary businesses based on how close they are to special events.

In Maryland, during the U.S. Open in 2011, county officials issued a citation to parents because their children's stand posed a safety hazard in an area where vehicular and pedestrian traffic were heavy.

Ultimately, the county waived the $500 ticket and mandatory court appearance, as well as the $38 permit fee. The family reopened the stand down the street.