Introduction to Minor Ownership in Business Structures

In the dynamic corporate landscape, the ability of a minor to own and operate a business structure such as a Limited Liability Company (LLC) or a corporation can be a complex legal issue. Understanding the regulations and legal considerations of minor ownership can provide clarity for parents, guardians, and business enthusiasts looking to enter the business world at a young age.

Can Minors Own LLCs?

A minor can legally own an interest in an LLC as a member, at least in jurisdictions like Delaware. However, this comes with certain complexities and potential legal challenges. For instance, if the LLC is trying to offer and sell membership interests in a private offering, there must be a valid exemption for the shares to be offered and sold to the minor. Additionally, if the minor is asked to participate in management, it’s important to note that contracts entered into by a minor are generally voidable at the option of the minor under most states' laws, including Delaware.

The Role of an Agent

One practical solution to manage these complexities is to have someone act on behalf of the minor, such as an agent, with valid authority to act on the minor's behalf. This agent can perform necessary tasks like banking and business contract negotiations. Such an arrangement provides significant comfort to potential investors and future business partners. The agent can act as a purchaser representative under regulations like Reg D, allowing a non-accredited investor to participate in Rule 504, 505, or 506 offerings.

Management and Fiduciary Duties

A key point to consider is the fiduciary duty directors in corporations are required to uphold. Since minors are not responsible legally for their judgment, they cannot serve as directors. However, they can act as shareholders and officers in a corporation, which allows them to be involved in operational aspects of the business. This separation ensures that the business can function effectively while complying with legal requirements.

Let's explore a real-life example. My son, at the age of 16, started mowing lawns and doing landscaping for his community and even bid on municipal jobs like the spring maintenance for the city of Rehoboth Beach, Delaware. He successfully secured the job and, while I supervised him, he was able to lead a team of his friends in completing the work before Memorial Day. This early entrepreneurial experience was invaluable and serves as a testament to the potential of young business owners.

Conclusion

While owning and operating an LLC or a corporation as a minor is possible, it does require careful planning and possibly the involvement of an adult agent to manage certain tasks. The legal landscape is clear that a minor can legally form, own, and operate an LLC, but significant restrictions apply to corporations due to the fiduciary duties of directors. With appropriate guidance and management, minors can successfully navigate the world of entrepreneurship and business.