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TexLaw
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4077
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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Hello This is a new question and I will pay for this. My

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Hello
This is a new question and I will pay for this.
My son, who is 15 years, in high school wants to start a business to show to potential college admissions folks that he really serious in pursuing business manager.
With that interest, I ( on his behalf) formed a Virginia LLC. Just got Federal ID as well.
But question is since he is still minor and can not operate bank account, write checks and so forth, I need to act managing member. I believe I created the LLC as single member LLC, with me as registered agent. Do I need to amend that LLC formation or is there any easy and elegant way?
I hope he can own the company as only discussed that with my accountant.

Thanks,
Jagan Reddy
Submitted: 1 year ago.
Category: Legal
Expert:  TexLaw replied 1 year ago.
Hi,

Thank you for your question.

If you are acting as a managing member in a single member LLC which you incorporated on his behalf, then you are the owner of the LLC.

Virginia law permits a minor to be an owner of an LLC. However, a minor cannot be bound by contract and cannot sign a binding contract. That would mean that all business contracts would need to be signed by you until he is 18 years old.

All that you need to do is draft a Membership Agreement that grants him a membership interest in the LLC. If you stated in the Articles of Organization that the LLC may only have one member, you would need to amend. However, if you use the general forms available, you likely did not make this a term and are allowed to simply add a member through a private agreement.

You would use the following form agreement (making adjustments where necessary): http://www.lawmart.com/forms/bus-lc11.htm

In the spot where it is talking about how much you are selling the membership for, you will say "in exchange for (Son's Name)'s work and talent".

Customer: replied 1 year ago.

 


But, that means he can not claim he owns the company, right?


 


Can he continue to own the company, and appoint me as COO and give me the write to operate the contracts and check book?


I also believe I used his name both at Virginia LLC formation forms (online application) and when I got Federal ID EIN. I am not sure how that will affect?


Should we simply ignore this company, close it and use his name as his company? Not sure if I did good job incorporating a company like this.


 


Thanks,


Jagan

Expert:  TexLaw replied 1 year ago.
Hmmm...interesting.

He can be the sole owner of the company under state law. He can appoint you as a manager and grant you authority to enter into contracts on the company's behalf.

This seems like it would be satisfactory for you to go and open the bank accounts for the company as its authorized agent. If you used his name in both the LLC articles of formation and the EIN application, then he is the owner.

Did you list yourself as a managing member as well though? If so, then this would mean you are also an owner (you would be 50-50 owners at this point).

What kind of business will he be conducting through the company?
Customer: replied 1 year ago.

I have not listed myself as managing member.


I guess your thought is good. I will consider adding me as managing member by filing amendment to articles, if I can do this.


 


I am not sure what to tell IRS in that for EIN though.


 


Being a 50% owner, and managing memeber makes sense to manage the company easy, I guess.


 


Thanks,


Jagan

Expert:  TexLaw replied 1 year ago.
I think if you are 50% owner and your son is 50% owner, then you are going to achieve what your goal is (i.e., to have your son gain experience as the owner of a business). It also allows you to conduct business for the LLC that he is not able to undertake because he is a minor.

Amending the Articles to show you as the managing member is going to satisfy the banks and any other entity that the LLC has an ability to enter into contracts.

You do not need to modify the EIN registration. All that matters is that the EIN is tied to the entity.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Best Regards,
ZDN
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4077
Experience: Lead trial/International commercial attorney licensed 11 yrs
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