How Old Do You Have to Be to Start a Business? A Legal Roadmap for Young Entrepreneurs

Disclaimer: This article provides general information for educational purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied upon as a substitute for consultation with a qualified attorney. Laws vary by state, and individualized guidance is recommended.

You have the technical skills, you have spotted a gap in the market, and maybe you have already built a prototype for a SaaS platform or a digital agency. But as you move to make your business official, you are probably running into walls. Whether it is a birthdate prompt on a payment processor or a signature line on a commercial lease, the legal system can feel like it was built to keep young founders out.

The truth is that while your ambition has no age limit, the legal rules around business ownership do. Knowing how "capacity to contract" works and what your state requires for registration is what separates a hobby from a real, legally protected business.

Is There a Minimum Legal Age to Start a Business?

There is no federal law in the United States that sets a minimum age for starting a business. From a practical standpoint, a 13-year-old can write code, manage social media accounts, or sell handmade goods. But there is a real gap between "working" and "registering" a business entity.

The main obstacle for young entrepreneurs is what is known as the Voidable Contract Doctrine. In most states, minors (typically those under 18) do not have the legal capacity to enter into binding contracts. That means if a minor signs a contract, they generally have the right to cancel or "void" that contract at any time before they turn 18. Because of this, banks, landlords, and vendors are often reluctant to work with minors, since the minor could legally walk away from the deal without the same consequences an adult would face.

To get around this, young founders usually need to move from operating on their own to setting up a formal business entity. That typically requires a "Legal Proxy," usually a parent or guardian, who provides the contractual standing that the market expects.

Can a Minor Form an LLC? State-by-State Requirements

A Limited Liability Company (LLC) is the go-to structure for most startups because it separates your personal assets from business debts. But whether a minor can serve as a "member" (owner) or "manager" of an LLC depends entirely on the laws of the state where the business is formed.

Some states specifically require organizers or members to be at least 18. Others are "silent" on the issue, meaning the law does not mention an age requirement, which often allows minors to be listed as owners as long as an adult handles the initial filing.

Prohibited vs. Permissive States

State rules on this topic fall into two general categories. Some states have explicit age requirements written into their LLC statutes, which means a minor cannot be listed as an organizer or member. Other states are silent, meaning there is no stated age requirement, and minors may be able to hold ownership interests with an adult handling the legal formalities.

Because these laws can change, always check your specific state's current LLC statutes or consult with an attorney before assuming your state falls into one category or the other.

In states where the law is silent, a minor can technically own the LLC, but a parent or guardian should serve as the Registered Agent and Manager to handle legal correspondence and sign binding agreements on the company's behalf.

Solving the "Age Gate": Payment Processors and Banking

Even if you successfully register an LLC in a permissive state, you will likely run into restrictions from digital platforms. Financial institutions and payment processors like Stripe, PayPal, and Shopify have their own Terms of Service that typically require account holders to be at least 18.

If a minor opens an account using a false birthdate, the platform's automated verification systems (known as KYC, or Know Your Customer) will usually flag the account eventually. That often results in a permanent ban and all held funds being frozen.

The Parental Proxy Solution

To stay compliant and keep the business running smoothly, young founders should use the following setup:

• Custodial Banking: Open a business bank account under a UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) framework. This lets the minor own the funds while the parent acts as the custodian.
• Verified Proxy: For platforms like Stripe, the account should be opened in the parent's name as the "Representative" of the LLC. The parent takes on legal responsibility for the account's activity until the founder turns 18.
• EIN Registration: When applying for an Employer Identification Number (EIN) with the IRS, the parent should be listed as the "Responsible Party" for the entity.

The Custodial Business Model: A Roadmap for Parents and Teens

The most practical way to launch a serious business before turning 18 is the Custodial Business Model. This approach treats the parent not as the "boss," but as a Legal Proxy or Registered Agent who provides the liability protection and contractual capacity the teen does not yet have.

Benefits of the Custodial LLC

• Liability Shield: If the business gets sued or takes on debt, the LLC protects the parent's personal assets (home, savings) from being touched, as long as the business is managed properly.
• Professional Credibility: Operating under an LLC name rather than a personal name signals to clients that the venture is a real, professional operation.
• Autonomy: The teen handles the day-to-day operations, product development, and marketing, while the parent takes care of the legal signatures.

To make this official, families should draft a Statement of Authority. This is an internal document that clarifies that while the parent is the legal representative, the teen has the authority to make operational decisions. It sets the teen up for full ownership while keeping the business on solid legal ground.

The 18th Birthday Transition Checklist

The whole point of a custodial business is a clean handoff. On your 18th birthday, you gain the legal capacity to sign contracts, and the "voidable" risk goes away. At that point, you need to update your business records to reflect your new status as a legal adult.

• Update the Operating Agreement: Amend the LLC's Operating Agreement to remove the custodial language and name the founder as the sole Managing Member.
• Transfer Membership Interests: If the parent held a percentage of the company for legal reasons, execute a formal transfer of interest to the founder.
• Notify the Secretary of State: File an Amended Articles of Organization or a Statement of Information to update the official state records.
• Update the IRS: Submit Form 8822-B to the IRS to change the "Responsible Party" on the EIN from the parent to the founder.
• Transition the Bank Account: Move the custodial business account into a standard commercial account in the founder's name.

Conclusion

You do not have to wait until you are 18 to build a real company, but you do have to work within the legal boundaries of adulthood. By using a parent as a legal proxy, choosing a state that allows minor ownership, and setting up custodial banking, you can get past the age restrictions that stop most young entrepreneurs.

Next Steps for Young Founders:

• Research your state: Find out whether your state allows minors to hold LLC membership interests or requires them to be 18.
• Appoint a Proxy: Sit down with a parent or guardian to talk through the Custodial Business Model.
• Secure a Registered Agent: Make sure you have a reliable address for legal service, which is a requirement for any LLC.
• Draft an Operating Agreement: Even if it is just you and a parent, put the rules of the business in writing to protect everyone involved.

Legal.com Liability Disclaimer

All content published by Legal.com is provided for general informational purposes only. It is not legal advice, does not constitute a legal opinion, and should not be relied upon as a substitute for consultation with a qualified attorney. No attorney-client relationship is created by reading this article, using Legal.com templates, or contacting Legal.com. Legal.com disclaims all liability for actions taken or not taken based on this publication.