Give the students a few themes to stick to so they have a starting point for their ideas. Choose holidays, sports or events like graduation. If you want to base the logo creation on a business they would like to have such as an ice cream shop, skating rink or fashion boutique, let that be the focus of their work. Let them to be as creative as they like by not giving them too many restrictions on colors, size or shape. Let them have complete creative control over their initial designs. You can always edit later.
Use an entire class period to allow them to sketch out ideas for their designs. Let them see examples of business logos to get a good grasp of the task. Once they've narrowed down the purpose of their logo, it's time for them to put visual images to their concept so they can begin building the logo. Take a peek at their projects along the way, giving guidance to those who seem to be a little lost or stumped for ideas.
You'll want to give them several days to finish the work. Add a report component to the design project to allow them to discuss what they are marketing with the logo and why they chose some of the elements. Ask questions like, "What does the red dragon mean?" Give them ample time to create their concepts but limit their ability to overedit by changing concepts.
There are plenty of ways to display the finished products. Work with your local college graphic arts department to have college students build the logo professionally based on the kids' sketches. This project could become a fundraiser by asking a local graphic design firm to reproduce the logos and allowing members of the community to purchase them as art. If you don't want to commit to a more involved end use, simply hang the logos in the classroom in time for parents night.