Can You Get an LLC Under 18? The Manager-Managed Solution for Teen Entrepreneurs

Many teen entrepreneurs wonder whether they can protect their business with an LLC before turning 18. The answer depends significantly on state law, because states differ in their requirements for LLC organizers, members, and managers.

In many circumstances, a minor can own an interest in an LLC. However, forming and operating an LLC while under 18 can create practical complications involving contracts, banking, financing, and other transactions. One potential solution is to have an adult assist with formation and, where permitted by state law, serve as the LLC’s manager while the minor retains an ownership interest.

Here’s how it works and what you need to know.

What You Need to Know First: Basic LLC Concepts

Before looking at potential structures, it helps to understand three important LLC roles:

Organizer: The person who signs and files the initial formation paperwork with the state.

Member: An owner of the LLC who holds membership and economic rights according to applicable state law and the LLC’s governing documents.

Manager: In a manager-managed LLC, the person authorized to manage the LLC and take actions on its behalf within the authority granted by state law and the operating agreement.

In many small businesses, the members also manage the LLC. However, where a member is under 18, separating ownership from management may help address some contractual and operational issues.

Is It Legally Possible to Form an LLC Under 18?

Potentially, yes, but the rules vary significantly by state.

Some state LLC statutes do not expressly impose a minimum age on organizers. Others require an organizer to have legal capacity or otherwise impose requirements that effectively prevent a minor from acting as the organizer.

For example, Texas requires an LLC organizer to have the capacity to contract. According to the Texas Secretary of State, this generally means a natural person who is at least 18 years old or another legal entity.

Other states may have different rules. For this reason, minors and their families should review the current LLC statute and Secretary of State guidance for the state where they intend to form the business.

Even where a minor cannot serve as organizer, an adult or other eligible person may be able to act as the organizer. Formation of the LLC does not necessarily determine who ultimately owns the company; membership and management rights are generally established under applicable state law and the LLC’s governing documents.

The Contract-Capacity Issue

Even when state law permits a minor to own an LLC interest, operating the company can present another challenge: contractual capacity.

Minors can generally disaffirm many types of contracts, subject to important exceptions and variations under state law. This can make banks, landlords, lenders, payment processors, vendors, and other businesses cautious about entering agreements where the person signing on behalf of the business is under 18.

For example, a bank may have its own policies governing business accounts involving minor owners or authorized signers. These policies vary significantly among financial institutions.

Federal customer-identification and beneficial-ownership requirements may also require banks to collect identifying information about individuals who own significant interests in a legal entity. However, these requirements should not be confused with a general federal rule prohibiting minors from owning a particular percentage of an LLC.

Before forming an LLC, it is therefore wise to ask the bank you intend to use whether it permits business accounts for LLCs with minor owners and whether an adult manager or authorized signer will be required.

One Potential Structure: A Manager-Managed LLC

Depending on state law and the policies of banks and other businesses involved, a manager-managed LLC may provide a practical structure for a business owned in whole or in part by a minor.

In this structure, the minor may hold a membership interest while an adult serves as manager and handles transactions requiring contractual authority.

Member-Managed vs. Manager-Managed LLCs

Member-Managed LLC: Members generally participate directly in managing the company and have authority as provided by state law and the operating agreement.

Manager-Managed LLC: One or more designated managers manage the LLC. Depending on state law, a manager may be a member or a non-member.

For a teen entrepreneur, a manager-managed structure may allow an adult manager to execute contracts and handle certain banking or administrative matters while the minor retains ownership rights.

However, this structure does not guarantee that a bank, lender, landlord, payment processor, or other third party will accept the arrangement. Each institution may impose its own requirements.

How an Adult Organizer Can Help

Where state law prevents a minor from serving as organizer, an adult or other eligible person may be able to form the LLC.

A typical process may involve:

Step 1: An eligible adult or entity acts as organizer and files the LLC’s formation document with the appropriate state agency.

Step 2: The LLC’s ownership and management structure is established according to state law and the company’s operating agreement.

Step 3: If appropriate, the operating agreement designates an adult as manager and specifies the manager’s authority to execute contracts and conduct business on behalf of the LLC.

The organizer does not necessarily have to remain an owner or manager simply because they filed the formation document.

Because LLC formation and management rules vary by state, the operating agreement should be drafted to comply with the law of the state where the LLC is formed.

Obtaining an EIN

An LLC may need an Employer Identification Number (EIN) from the IRS for federal tax administration, banking, hiring employees, and other purposes.

An EIN identifies the business for federal tax purposes. Obtaining an EIN does not itself resolve questions concerning a minor’s contractual capacity, ownership rights, or eligibility to open a particular bank account.

Banks may impose their own requirements even after an LLC receives an EIN.

Banking Considerations for Minor-Owned LLCs

Banking is often one of the biggest practical challenges for businesses owned by minors.

Financial institutions must comply with federal customer-identification and beneficial-ownership requirements, and they also maintain their own account-opening policies.

A bank may require:

• An adult authorized signer or manager.
• Identification for beneficial owners.
• LLC formation documents.
• An operating agreement.
• An EIN.
• Additional information about the company’s ownership and management.

There is no universal rule requiring a minor to own less than 25% of an LLC in order to obtain a bank account. The 25% threshold commonly associated with banking compliance relates to beneficial-owner identification requirements and should not be treated as an ownership limit for minors.

Because policies vary, speak with the financial institution before choosing an ownership or management structure solely for banking purposes.

Taxes and the “Kiddie Tax”

Starting a business as a minor also creates tax considerations.

An LLC’s federal tax treatment depends on the number of owners and any tax elections made by the LLC. A single-member LLC, for example, is generally disregarded for federal income tax purposes unless it elects another classification, while a multi-member LLC is generally taxed as a partnership unless it makes a different election.

A minor who actively operates a business may have earned income and self-employment tax obligations.

The federal “kiddie tax” is primarily concerned with certain unearned income, such as investment income. For 2026, a child with more than $2,700 of unearned income may be subject to the kiddie-tax rules if the other statutory requirements are met.

Business income should therefore not automatically be treated as kiddie-tax income simply because the business operates through an LLC.

Because the tax treatment depends heavily on how the LLC is structured and how the income is earned, consulting a qualified tax professional can be particularly valuable for a profitable teen-owned business.

FAFSA and the Student Aid Index (SAI)

Teen entrepreneurs who plan to attend college should also consider how business ownership may affect financial-aid calculations.

The FAFSA requires disclosure of certain assets, and the treatment of business interests can depend on who owns the business and the applicable FAFSA rules for that award year. Student assets and parent assets can also receive different treatment in the Student Aid Index calculation.

Retirement accounts are generally treated differently from ordinary reportable investments for FAFSA purposes. However, business owners should not restructure ownership, transfer assets, or make retirement contributions solely to influence financial-aid eligibility without considering the tax, legal, and financial consequences.

Because FAFSA rules can change from one award year to another, college-bound entrepreneurs should review the current FAFSA instructions and, where significant assets are involved, consider speaking with a financial-aid or tax professional.

Practical Steps for Teen Entrepreneurs

Starting an LLC before turning 18 can be possible, but it requires more planning than forming an LLC as an adult.

Check Your State’s Rules: Determine whether your state imposes an age or contractual-capacity requirement on LLC organizers, members, or managers.

Consider Management Structure: If appropriate under state law, consider whether an adult manager could handle contracts and other legally binding transactions while the minor holds an ownership interest.

Talk to Your Bank Before Filing: Ask whether the institution permits accounts for LLCs with minor owners and what it requires from managers, beneficial owners, and authorized signers.

Create an Operating Agreement: Clearly establish ownership, management authority, distributions, voting rights, and what happens when the minor reaches adulthood.

Understand the Tax Consequences: Determine how the LLC will be taxed and whether the minor will owe income or self-employment taxes.

Consider College Financial Aid: If college is approaching, review the current FAFSA rules before making significant ownership or asset-planning decisions.

Conclusion

You may not have to wait until 18 to own an interest in a legitimate business entity. However, there is no single LLC structure that works for every minor in every state.

State LLC laws, contract-capacity rules, banking policies, tax requirements, and financial-aid considerations can all affect the appropriate structure.

In some circumstances, an adult organizer or manager can help make a minor-owned LLC operational while preserving the minor’s ownership interest. The exact arrangement should be designed around the laws of the state where the LLC is formed and the requirements of the banks and other institutions the business expects to use.

For a business generating meaningful revenue, entering significant contracts, or involving substantial assets, consulting a qualified business attorney and tax professional can help ensure the structure works as intended.

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