Is it Possible for a Teen to Form a Limited Liability Company?

LLCs may assist young company owners reduce risk and personal responsibility, but can minors create an LLC?

What you’ll discover:

What are the advantages of forming an LLC for young company owners?
How can teenagers create an LLC?
Is starting an LLC any different if I am under the age of 18?
What if I reside in a state where minors are not permitted to be organizers?

Starting a company as a teen or young adult is a major risk, but the benefits may be well worth it. Businesses not only earn money, but they also educate people about entrepreneurship, resource management, and other skills. When an adolescent or juvenile chooses to create a company, one of the most crucial issues is how the firm should be formed. There are just a few choices in general: corporation, limited liability company (LLC), single proprietorship, or partnership. The information provided here may assist aspiring entrepreneurs in learning more about LLCs and determining if an LLC is the appropriate match for their firm.

What are the advantages of forming an LLC for young company owners?

Starting a company as a teen may be as easy as providing pet sitting, childcare, lawn care, or even social networking services to family, friends, and neighbors. Yet, if no paperwork to establish a business corporation is submitted, it is deemed a single proprietorship. In a sole proprietorship, the business owner alone bears all obligations and liabilities of the company. This implies that an owner’s personal assets and bank accounts effectively protect the obligations of the firm. As a single owner, a juvenile entrepreneur may have difficulties obtaining vendor agreements or obtaining financing, since banks and other firms may be concerned about their ability to collect if their invoices go unpaid.

A business owner, on the other hand, may incorporate a limited liability company or a corporation to increase creditworthiness and decrease personal risk. By essentially creating the firm its own legal entity, an LLC protects owners from personal accountability for commercial losses. As a result, if an LLC fails to pay a supplier or other creditor, the creditor will be unable to collect the debt from the owner’s personal assets. But, bear in mind that if a company owner fails to fulfill the standards for operating an LLC correctly, especially when it comes to handling the firm’s money, the security provided by an LLC may be ineffective.

How can teenagers create an LLC?

Establishing an LLC as a teen often entails the same stages as forming an LLC as an adult. One part paperwork, one part effort, and a pinch of patience are required.

To form an LLC, you must first go through a number of stages. These stages involve naming the LLC, selecting a registered agent, drafting an Operating Agreement, paying a fee, and submitting the Articles of Incorporation to the Secretary of State.

Is starting an LLC any different if I am under the age of 18?

Although there is no legislation that says kids cannot form an LLC, several states do not allow minors to be organizers. Organizers are required to form an LLC since they are in charge of submitting the incorporation documents.

Colorado, Illinois, Minnesota, Oregon, and Texas are among the states that restrict minors under the age of 18 from organizing. Thankfully, numerous states, including California, Delaware, Nevada, and Wyoming, have no laws prohibiting minors from serving as organizers. Thankfully, even when a state prevents children from organizing, there is always a way.

What if I reside in a state where minors are not permitted to be organizers?

Even if they reside in a state that does not allow minors to be organizers, teenagers may nonetheless create LLCs. More than half of all companies in the United States are registered in Delaware but have their headquarters and do business elsewhere. After submitting the Articles of Incorporation in a teen-friendly jurisdiction, such as Delaware, and having the Secretary of State accept them, the LLC must next register with the state in where it will actually be situated. Registering an LLC in a state is a separate procedure from creating an LLC and is required in every state. The registration procedure varies by state and may be referred to as “foreign qualification” or a “certificate of authorization.”

Another alternative is to choose someone above the age of 18 as the organizer, such as a family member, friend, attorney, or someone you may trust. Just be sure to acquire a written agreement that outlines their position, and get legal counsel on how to arrange that relationship so that the organizer cannot refuse to give over the keys when the time comes.