There are some pretty impressive kids and teenagers out there creating, building, and leading incredible initiatives. You may know a teen who is doing just that, and you might encourage them to start their own business one day when they are older. But why do they have to wait until they are older — can’t start their own business now?
The question is: can minors start a business? Is this even legal? What are the rules about minors forming and owning their own limited liability companies (LLC)? Can you get an LLC as a teenager or a minor?
With over 70 percent of high school students reporting in a survey that they want to start a business someday, the question of whether minors can start their own business has become a hot topic for discussion. And we have the answers!
LLC Rules and Regulations for Minors
Unfortunately, no matter how awesome a business idea may be, the chance that a minor will be legally able to organize their own company is pretty slim. Minors (or individuals under the age of 18) in most states are not legally allowed to form an LLC. Some specific states, like Illinois and Texas, even mandate that LLC organizers must be 18 or older.
Since laws may vary from state to state, check with your Secretary of State’s office and review the specific rules to find out the requirements. You can also learn more about your specific state rules and regulations here. Or, you can verify with the IRS to see if the minor’s age satisfies your state’s requirements by calling the IRS toll-free business hotline at (800) 829-4933.
Other Ways for Minors to Start a Business
Although minors are unable to form their own LLC, there are no laws that pertain to minors being partners of a business. This means that if the minor has a business partner over the age of 18, the business partner can be responsible for the LLC formation, operation and other daily tasks of running a business that a minor would not legally be able to manage.
If the state the minor is living in does not allow them to organize an LLC due to a strict age requirement, then there is also the option of forming their LLC in a state that does allow minors to do so…or one that at least has more age leniency.
Minors are also allowed to be members of LLCs — there is nothing in the law preventing a minor from this status. So luckily, this means there are a few alternatives if a minor is eager to organize their own business!
One point to be aware of is that most contracts are not legally binding when signed by a minor. In most states, minors are not considered legally competent to enter into a binding agreement, therefore rendering any signed contracts null and void.
This would make day to day tasks of doing business pretty difficult if a minor were solely running and organizing their business. Any entrepreneur knows that contracts and other legal documentation are essential to running a successful business. In some cases, a minor can have their parent or guardian or their business partner sign on behalf of them.
Also, most businesses require some sort of bank account to be set up — this arrangement certainly makes it easier to accurately separate your business and personal finances. Most banks require an individual to be over the age of 18 to open an account. Once again, a parent/guardian or business partner over the age of 18 can do so on the minor’s behalf if the minor can’t do it themselves.
Not a Minor? Then Form Your LLC Today!
If you are under the age of 18 and looking to form your own LLC, do some additional research on your state laws to see if you’re legally allowed to do so. If you find some roadblocks, see if you can find a business partner who will help form and operate the LLC with you.
Otherwise, spend some time truly mapping out what your business plans for the future are. Once you turn 18, you can finally make your business dreams become a reality!
Latest posts by Lisa Crocco (see all)
- 4 Low-Cost Business Ideas to Help Jumpstart Your Dreams - October 8, 2018
- The Benefits of S Corporations For Small Businesses - October 3, 2018
- Poll: 57% Sneak in Downtime at Work By Going to Lunch - September 30, 2018