May a Minor Form an LLC?
This post – asking “May a minor form an LLC?” – is a companion to May a Minor Form a Corporation?
I have been wanting to write this post for more than two years, ever since writing the corporation post referenced above. However, as explained further below, I felt uncomfortable doing so because I was somewhat unsure of the answer.
No Authoritative Answer
After hours of online research, I found no authoritative answer. Some people (including some lawyers) state that a minor may not form an LLC. However, they cite no authority supporting this proposition. They appear simply to make an assumption to this effect, or they conflate forming a legal entity with entering into a contract. (See Contracts with Minors can Lead to Major Problems.)
Conversely, some lawyers state that yes, a minor may form a corporation. However, they, too, fail to cite relevant authority.
Not having found any cases or treatises addressing this issue, I decided to analyze relevant statutes.
I started with Delaware, because so many entities are formed there. Delaware Limited Liability Company Act Section 18-201(a) states that “In order to form a limited liability company, 1 or more authorized persons must execute a certificate of formation.” (Emphasis added.)
Section 18-101(12) states that “person” includes, among others, “a natural person”. Nowhere does that section state that the natural person must be an adult. Accordingly, Delaware appears to allow a minor to form an LLC.
Next I turned to California, because it is a major state as well as where I practice. Corporations Code Section 17702.01(a) states that “One or more persons may act as organizers to form a limited liability company….” (Emphasis added.)
Section 17701.02(v) states that “person” includes, among others, “an individual”. Like Delaware, California does not state that the individual must be an adult. (While California law prohibits minors from taking certain actions, those actions do not include forming an LLC.) Accordingly, California appears to allow a minor to form an LLC.
California’s current LLC law is based on the Revised Uniform Limited Liability Company Act. I examined the Act and comments prepared by the National Conference of Commissioners on Uniform State Laws. Again, I found no requirement that an LLC’s organizer must be an adult.
May a Minor Form an LLC? Yes.
So, my conclusion is as follows:
- The general rule is “Yes, a minor may form an LLC.“
- If I become aware of any states that are exceptions to this rule, I will update this post accordingly.
Updated as of January 29, 2020 – states that differ from the general rule identified so far (emphasis added):
- Colorado Revised Statutes Section 7-80-203 states, in relevant part, that “One or more persons may form a limited liability company by delivering articles of organization to the secretary of state for filing pursuant to part 3 of article 90 of this title. Any such person who is an individual shall be of the age of eighteen years or older.”
- 805 Illinois Compiled Statutes 180/5-1 states, in relevant part, that “One or more persons, other than natural persons under 18 years of age, may organize a limited liability company….”
- Oregon Revised Statutes Section 63.044 states, in relevant part, that “One or more individuals 18 years of age or older…may form a limited liability company….”
- Title 3, Chapter 101 of the Texas Business Organizations Code does not address this issue. However, instructions for Form 205 (Certificate of Formation) state, in relevant part, that “An organizer may be any person having the capacity to contract for the person or for another; that is, a natural person 18 years of age or older….” This reflects Business Organizations Code Section 3.004(a), which applies to all types of business entities and states that “Any person having the capacity to contract for the person or for another may be an organizer of a filing entity.” Only adults have the power to contract, thus only adults can be LLC organizers in Texas.
Photo credit: iStock
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
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