Starting a business, especially an LLC, prompts questions about age requirements. This is a significant concern for young entrepreneurs keen on entering the business world but potentially hindered by their age.
Knowing the legal age for forming an LLC, options for minors wishing to start a business, and the challenges they might face is crucial. This article aims to clarify the age-related aspects of starting an LLC, including whether individuals under 18 can own a business or form an LLC.
How Old Do You Have to Be to Start an LLC?
The age requirements for starting an LLC vary by state. While most states allow minors to be LLC members, certain states prohibit minors from organizing an LLC without adult assistance.
Legal Age Requirements for Forming an LLC
States with Age Restrictions
In the following states, you must be at least 18 years old to form an LLC:
- Colorado
- Illinois
- Minnesota
- Oregon
- Texas
Minors in these states cannot act as LLC organizers and must involve an adult to establish the business.
In most other states, no specific age restrictions prevent minors from forming LLCs. However, just because minors can form an LLC doesn’t mean they won’t face challenges, particularly when entering contracts or handling financial matters.
Alternative Options for Minors
If minors face legal barriers to forming an LLC, there are alternative approaches to help them achieve their entrepreneurial goals. With the assistance of an adult, minors can still create and manage a business.
| Option | Description | Advantages | Challenges |
|---|---|---|---|
| Adult-Assisted Formation | An adult forms the LLC, minor is a member. | Legal contracts handled by adult. | Minor has limited control over operations. |
| Becoming an LLC Member | Minor joins an existing LLC as a member. | Easier entry into business. | Responsibility is shared with other members. |
| Registered Agent Service | A registered agent handles legal documents for the minor’s LLC. | Helps with compliance and legal notices. | Minor still has limited business management. |
1. Adult-Assisted LLC Formation
One option is for an adult—typically a parent or guardian—to form the LLC on behalf of the minor. The adult is the organizer, handling the necessary paperwork and legal responsibilities. Once the LLC is formed, the minor can be added as a member, giving them a stake in the business.
- Role of the Adult: The adult member should sign all contracts (e.g., operating agreements, vendor/supplier contracts, lease agreements, service contracts) on behalf of the LLC. Filing a statement of authority with the Secretary of State can clarify that only adult members can legally bind the LLC.
Case Study: The Success of Mikaila Ulmer’s BeeSweet Lemonade
At just 11 years old, Mikaila Ulmer became the CEO of BeeSweet Lemonade (now known as Me & the Bees Lemonade), a company she founded when she was even younger. Mikaila wanted to create a product that combined her love for lemonade with her passion for helping bees [1] .
Overcoming Challenges as a Minor-Owned LLC
Although Mikaila was too young to form an LLC on her own, her parents stepped in to help. They acted as the LLC organizers, handling the legal responsibilities and managing contracts. This allowed Mikaila to focus on growing her business while her parents ensured compliance with state laws [2] .
One of the biggest challenges they faced was securing business contracts and partnerships. Since Mikaila was a minor, many partners were hesitant to sign agreements directly with her. However, by having her parents sign contracts on behalf of the LLC, they were able to secure valuable deals, including a $60,000 investment on the TV show Shark Tank [3] .
The Importance of Adult Guidance
Mikaila’s story highlights how young entrepreneurs can pursue their dreams with adult assistance. By having her parents involved, Mikaila was able to legally form her LLC, manage financial agreements, and focus on her role as the face of the brand [4] .
Today, Me & the Bees Lemonade is a national brand, sold in Whole Foods and other major retailers, proving that with the right support, minors can successfully overcome the legal challenges of starting a business [1] .
2. Becoming a Member of an Existing LLC
Minors can also join an existing LLC as a member. Since no age restrictions exist on LLC membership, minors can become co-owners of an LLC alongside adult members. This allows them to have an ownership interest in a business without forming and managing an LLC independently.
- Considerations: If the LLC is member-managed, all members, including minors, have a say in daily operations. To avoid contract complications, adult members should handle all legal agreements.
3. Using a Registered Agent Service
A registered agent service can help ensure compliance with state regulations for minors forming LLCs in states that allow it. A registered agent receives legal documents on behalf of the LLC and can assist with deadlines and compliance, relieving minors of some administrative burdens.
- Considerations: While using a registered agent service is helpful, the minor will still be responsible for critical business decisions. An adult mentor or advisor is recommended to provide guidance and support.
Potential Challenges for Minor-Owned LLCs
While minors can own LLCs, they face several legal and practical challenges that may affect their ability to run the business effectively.
Contract Limitations
The most significant challenge for minor-owned LLCs is the limitation on their ability to enter contracts. In many states, contracts signed by minors are voidable. This means that the minor can choose to void the contract, making it risky for other businesses to engage with the LLC.
- Solution: Including one or more adult members in the LLC ensures that someone with full legal capacity signs contracts. Filing a statement of authority further protects the LLC by specifying that only adult members have the authority to bind the business in contracts.
Banking and Financial Hurdles
Banks are often reluctant to open business accounts or provide loans to LLCs owned by minors due to the voidability of contracts. This creates financial hurdles for the business.
- Solution: Minors can appoint a trusted adult, such as a parent or legal guardian, as an officer of the LLC. This adult can open the business’s bank account and manage financial operations. The appointment should be documented in the LLC’s operating agreement.
Liability Concerns
While LLCs typically offer liability protection, minor-owned LLCs present unique risks. If the LLC engages in fraudulent or illegal activities, adult members or managers may be held personally liable, even if a minor was involved.
- Solution: Adult members should closely monitor the business’s operations to ensure compliance with laws. The LLC’s operating agreement should clearly define the roles and responsibilities of both minor and adult members to avoid misunderstandings.
Critical Takeaways for Minor-Owned LLCs
Starting an LLC as a minor presents particular challenges but is far from impossible. Understanding the state-specific age requirements and potential legal barriers is critical to making informed decisions. In states with restrictions, young entrepreneurs can rely on adult members to help them get started.
Success for minor-owned LLCs often hinges on planning and taking steps to address potential obstacles. This could involve involving adult members, using a registered agent service, or properly handling legal agreements. With the proper support and planning, young entrepreneurs can overcome these challenges and gain valuable business experience.
Frequently Asked Questions
What Is the Minimum Age Required to Establish an LLC?
Individuals under 18 years old are generally not permitted to establish a business entity on their own legally. However, parents can form an LLC on behalf of their child’s business, where the parent acts as the organizer and potentially the sole member, with their name included in the LLC’s operating agreement.
Can a Minor Sign Legal Documents for Their LLC?
Generally, no. Most states consider contracts signed by minors to be voidable, meaning the minor can cancel them. To avoid this, it’s recommended that an adult member of the LLC sign any legal documents on the LLC’s behalf.
