LLC Age Requirement: Can a Minor Be an Owner of an LLC?

Are you a parent eager to help your child pursue their business aspirations, or maybe you’re a young entrepreneur prepared to take your venture to the next level? You’ve come to the right spot.

Starting an LLC in the US is an exciting prospect, but it can get a bit complicated if the entrepreneur is a minor. You might be asking yourself, “Can a minor be an owner of an LLC?” The answer depends on the state and isn’t simple.

No need to stress! This blog will take you through all the essential information regarding minors owning LLCs, including LLC age requirements, advantages and disadvantages, and advice for managing an LLC in more regulated states. Let’s dive in!

What Is an LLC for a Minor?

An LLC or limited liability company,

is a common legal business structure in the United States that offers similar liability protection as a “corporation” but retains much of the informality of “partnership” business forms. LLCs are used for a variety of enterprises and can have a single or multiple owners (known as members). But what about the age requirements to form an LLC? Unfortunately, there is no consistent answer to the LLC age limits to owning this business form in every state.

LLCs can include any number of members, but the topic of age limits for ownership can be quite complex. This brings us to an interesting point: What is an LLC for minors?

To put it simply, an “LLC for Minors” isn’t a special type of LLC. Instead, it refers to the potential for minors—those under 18 years old—to be members or owners of a regular LLC. This varies by state, with some allowing minors full ownership rights and others imposing certain restrictions or requiring that adults oversee their activities.

Can a Minor Form an LLC in the US?

For young entrepreneurs eager to start their own business, the possibility of forming an LLC might seem enticing. Let’s explore what roles minors can play in this process and what limitations they might face:

• Role of the Organizer: Essential in the LLC formation process, the organizer is responsible for completing and filing all necessary paperwork and ensuring that the business meets legal standards. This role is pivotal for setting the foundation of the LLC.
  
  
• Variability by State: The ability of minors to serve as organizers varies widely depending on the state.
  
  • States Prohibiting Minors: In these places, an adult—often a parent or guardian—needs to take the reins. This adult manages all the legal documents and responsibilities until the minor reaches the age of majority, usually 18.
    
    
  • States with No Age Restrictions: Here, minors have the green light to be organizers. Even so, it’s wise to have an adult involved to help steer through any legal intricacies that might pop up.
    
    
• Importance of Age Requirements:
  
  • Contractual Capacity: This concern is all about legalities—minors usually can’t enter into contracts on their own, which could muddle the waters of LLC formation.
    
    
  • Legal Protection: Having an adult as the organizer not only ensures that all legal bases are covered but also protects the interests of the young entrepreneur.

Can a Minor Own an LLC in the US?

To answer the question, absolutely, minors can own an LLC, but there’s a bit more to it than just saying “yes.”

• Ownership vs. Formation: The process of owning an LLC brings its own set of challenges, distinct from the complexities of forming one. Minors can own LLCs even in states where they’re not allowed to be organizers. However, the rules of contract law complicate things quite a bit.
  
  
• Contractual Rights and Protections: Minors have the unique legal right to void contracts at will, a safeguard that extends to their parents or guardians. This means that if a minor decides to step back from a contract they’ve signed, they can do so freely, and so can their guardians on their behalf. Unfortunately, this flexibility doesn’t apply to the other party in the contract, who is typically an adult and bound by the contract’s terms.
  
  
• Challenges with Contract Enforcement: It’s a common practice for courts to shy away from enforcing contracts that involve minors, mainly because there’s an underlying assumption that young people might not fully understand the commitments they are making. This means a minor can essentially exit a contract without legal consequences, leaving the adult in a bind.
  
  
• Understanding and Capacity: The laws are designed to protect minors who may not fully comprehend the obligations and rights entailed in a contract. It’s important to note that any contract signed by a minor is still considered binding until they or their guardian chooses to void it.
  
  
• Real-World Business Hurdles: Owning an LLC sounds great on paper, but it can be challenging in practice for a minor. Take, for instance, a minor who dreams of running a catering business; they may find it tough to get chefs and vendors on board, as these adults might be hesitant to make binding agreements with someone so young.

Can a Minor Be a Member of an LLC in the US?

Now, let’s talk about LLC membership. To be honest, most states in the US are pretty welcoming of minors. While some states may restrict the formation or other operational procedures here and there, others don’t.

• General Rule: In most states, there are no age restrictions for LLC members, which means a minor can legally become a part of an LLC that an adult has established.
  
  
• Exceptions to the Rule: It’s important to be aware of a few exceptions, though. For example, in states like Colorado and Illinois, specific laws explicitly prevent minors from becoming members of an LLC, whether the LLC is newly formed or already established.
  
  
• Single-Member LLCs: In cases where an LLC has only one adult member, that member can include their minor child, thereby converting it into a multi-member LLC.
  
  
• Multi-Member LLCs: Generally, adding a minor to a multi-member LLC is straightforward in states that permit it. Assuming there are no state-specific bans, minors wishing to join or even be the sole member of an existing LLC should face no legal hurdles.

Which US States Restrict LLC Ownership for Minors?

If you’re wondering which states restrict minors from owning an LLC, the answer is straightforward. The US states that explicitly prohibit minors from opening their LLCs include:

• Colorado
• Illinois
• Minnesota
• Oregon
• Texas

In all of these states, forming a Limited Liability Company (LLC) legally requires you to be at least eighteen (18) years old.

US States That Do Allow Minors to Own a Business

Luckily, almost all states (except the previously mentioned ones) allow minors to register businesses. For example, minors can freely form an LLC in the following US states:

• California
• Delaware
• Nevada
• Wyoming
• Montana

But that does not mean that teens who own businesses can do everything that adults can. Teenagers may not be able to sign contracts with suppliers, workers, and other people. Minors are also not allowed to get licenses to sell alcohol or marijuana. This means that a responsible adult will need to sign agreements or obtain permits for the teen.

Is Forming an LLC the Best Choice for a Minor?

We must weigh the benefits and drawbacks before choosing to create an LLC as a minor. For minors, LLC ownership presents both exceptional opportunities and disadvantages.

Benefits of Forming an LLC for a Minor

Limited Liability Protection: Forming an LLC shields your assets from the company’s debts, providing you with a piece of mind.

• Credibility: By forming an LLC, a minor can increase their company’s credibility and gain more customers and partners.
  
  
• Tax Flexibility: LLCs offer various tax options that can benefit young business owners.
  
  
• Learning Experience: Managing an LLC provides valuable business skills and financial literacy that can benefit a minor’s future endeavors.

Drawbacks of Forming an LLC for a Minor

• Legal Restrictions: Minors may face challenges entering contracts or obtaining necessary licenses without adult assistance.
  
  
• Additional Responsibilities: Running an LLC requires time and effort, which might be overwhelming for some minors alongside school and other activities.
  
  
• Potential Hesitance from Partners: Other potential businesses may be hesitant to engage with minors, impacting opportunities for collaboration.
  
  
• Management Challenges: Inexperienced young business owners may encounter difficulties if they are not given the right advice.

To summarize, forming an LLC can be a smart option for a minor, but it is vital to consider the risks involved. Getting an adult mentor or company formation experts can help you deal with these issues and make sure your journey as a business goes well.

How Can a Minor Start an LLC in the US?

Learning about the LLC age requirements, benefits, and challenges is your first step. Once you’re ready, the process for minors is quite similar to that for adults, involving paperwork and a bit of patience:

• Choose a Name: Pick a unique name for your LLC that meets your state’s regulations, and register it.
  
  
• Select a Registered Agent: It’s helpful to have an adult handle the role of a registered agent—or a trusted third-party service provider—as they will manage all your legal documents.
  
  
• Draft an Operating Agreement: Though not mandatory, an operating agreement outlines how your LLC operates and can be incredibly useful.
  
  
• File the Articles of Incorporation: Submit these documents to your Secretary of State and pay any necessary fees.
  
  
• Review Your Paperwork: Before filing, it’s smart to have a business legal expert look over your documents to ensure everything is correct.

Starting an LLC as a minor can be tricky, especially if it’s your first time. Mistakes can lead to legal snags and lost time. That’s where seasoned company formation service providers like Business Globalizer come in handy. Our team is 24/7 here to guide you through the process, helping you comply with state laws and avoid costly errors.

Available Options for Your Kid: What If I Live in a State That Prohibits Minors from Being Organizers?

If your state doesn’t allow minors to be LLC organizers, don’t worry—your child can still own an LLC. In states with fewer restrictions, it’s easier for young entrepreneurs to start. However, in more restrictive states, convincing others to do business with minors might be a bit tougher.

Here are some alternatives to consider:

• Register the LLC in Another State: You have the option to register the LLC in a state where minors are permitted to serve as organizers. You can utilize a business-related professional address by getting a virtual mailbox in that state.
  
  
• Join Their LLC: As a parent, you, your spouse, or any adult family friend can become a member of your child’s LLC. This allows you to sign contracts and act on behalf of the LLC, making other parties more comfortable while still giving your child ownership.
  
  
• Form an LLC Yourself: Even though forming an LLC could appear difficult, it is actually quite simple, especially with company formation services. You can choose reasonable services and complete the required paperwork in a matter of minutes. Your child can become a member of the LLC after it is established, which will encourage their sense of ownership over the company.
  
  
• Implement a Manager-Management Structure: Typically, LLCs operate under a member-management structure. However, you can switch to a manager-management structure, designating adults to handle day-to-day operations. This change can be documented in the articles of organization or operating agreement, allowing your child to remain a passive member.

These options can help pave the way for your child’s entrepreneurial aspirations, even in states with restrictive laws.

How to Avoid Contractual Issues with Having a Minor as an LLC Member?

Dealing with minors as LLC members comes with its share of complexities. Here are some practical ways to sidestep potential legal pitfalls:

• Involve an Adult: It’s wise to bring an adult, like a parent or guardian, into the mix. This person can handle contract signings and other formalities on behalf of the minor. It reassures everyone involved that the legal aspects are properly taken care of.
  
  
• Keep Contracts Clear: Aim for simplicity and clarity in all your contracts. Using straightforward language helps avoid any confusion that might complicate matters later. It’s all about making sure everyone understands and agrees to the terms without any fuss.
  
  
• Document Everything: Always get it in writing. From partnership agreements to service contracts, having a written record is your best defense against misunderstandings. It’s a simple step that safeguards both the minor’s and the LLC’s interests.
  
  
• Set Up Strong Leadership: Put adults in charge of the major decisions and legal responsibilities. This doesn’t just protect the minor from legal liabilities; it also puts experienced hands at the helm, ensuring that your business is in good hands.

Following these steps can help you handle the unique challenges of having a minor as an LLC member, smoothing the way for your business to thrive without legal hiccups.

Can a Nonresident Minor Be an Owner of an LLC in the US?

While there might be some state-specific regulations regarding minors and LLCs, generally and technically speaking, a nonresident minor can be an owner of an LLC in the United States. The rules governing LLC ownership do not typically restrict ownership based on nationality or residency.

However, the complexities of contracts and legal responsibilities might require the involvement of a guardian or adult representative, especially for ensuring compliance with US laws. Nonresident minors and their representatives must seek specific legal advice or thoroughly consult with a legal expert to handle these issues effectively.

Note: If the owner or director of an LLC is a nonresident minor, a responsible adult must assume the role of director for the purposes of opening a bank account.

3 Swift Tips for Minors Owning an LLC

If you are feeling overwhelmed about the whole concept, there are 3 short and quick tips to keep you a bit relaxed:

• Add Adults to the LLC: Include members over 18 to manage contracts and legal tasks.
  
  
• File a Statement of Authority: Clarify that only adults handle legal and contractual matters.
  
  
• Use a Member-Management Structure: Designate adults as managers, allowing minors to be passive investors.

Quick Insights

• Varied State Rules: Minors’ ability to own or form LLCs differs by state—some allow it, others don’t.
  
  
• Adult Involvement: In restrictive states, adults must handle the formalities until the minor turns 18.
  
  
• Ownership Challenges: Minors can own LLCs but might struggle with contract management.
  
  
• Contract Clarity: Keep language simple and involve an adult to ensure everything’s above board.
  
  
• State Restrictions: A handful of states specifically ban minors from forming LLCs.
  
  
• Workarounds: Consider registering in a different state or involving an adult to comply with local laws.
  
  
• Benefits vs. Challenges: LLCs offer protection and learning for minors but come with legal hurdles.
  
  
• LLC Ownership for Nonresident Minors: Nonresident minors can technically own a U.S. LLC, though they’ll need an adult to manage legal complexities. Legal consultation is advised.
  
  
• Managing Minor Ownership: Include adult members to handle contracts, file a Statement of Authority to restrict legal actions to adults, and implement a member-management structure with adults as active managers and minors as passive investors.

FAQs

Q1: Should I form an LLC in the US for my kid’s business?

Answer: To start your kid’s business, forming an LLC can provide personal liability protection and enhance credibility. However, consider your specific situation and consult with a professional to determine if it’s the best choice for your child’s venture.

Q2: How should an operating agreement be written for a minor’s LLC?

Answer: When creating an Operating Agreement for a minor’s LLC, make sure it is customized to their requirements and company objectives by outlining the roles, responsibilities, and management structure. For assistance in making sure it complies with all legal requirements, you can use templates that are readily available online or speak with an attorney.

Q3: What’s the youngest age a minor can own a business?

Answer: Theoretically, anyone can launch a business at any age, except for states that have explicit laws against it. In California, for instance, a 12-year-old can form an LLC, but they will probably require help from a parent or guardian to get through the procedure.

Q4: Can a minor run an LLC in the US as a non-resident?

Answer: Certainly, a minor can manage an LLC in the United States as a non-resident, but some legal requirements need to be met. Although minors may join an LLC, an adult is usually required to serve as the registered agent, manage legal matters, and make sure state regulations are followed.