Yes, as a minor he cannot set up a corporation. However, he is only interested in setting up a sole proprietorship.
His business would be very small-scale -- basically manufacturing (and selling) a hobby-related item. He could do this without setting up a sole proprietorship -- he has customers who want to buy his product.
However, we want him to sell his product in a legal and above-board manner. We want him to collect (and pass on to the state) the appropriate state sales tax on what he sells. His profit should be small enough that he doesn't need to pay income tax on it, but we want him to go through the process of filling out the tax forms in order to do things legally.
In particular, we as parents won't allow him to set up a website until he has established his business legally, and he is itching to put out his info on the web.
So do we really need to tell him that he can't act on this dream until he turns 18?