Legal Question in Business Law in California

Re: Minor Owning a Business

Minors can OWN property, including businesses. However, minors are under a severe handicap in RUNNING a business, because their contracts are generally void, and running any business is all about making contracts .... buying, selling, handling money, hiring, signing papers of all kinds. Running a business as a minor would be like a blind person driving in a grand prix road race. The business should be placed in the minor's ownership under some kind of custodial arrangement, or perhaps sold and the proceeds be put in a custodial account.

Re: Minor Owning a Business

Minors can OWN property, including businesses. However, minors are under a severe handicap in RUNNING a business, because their contracts are generally void, and running any business is all about making contracts .... buying, selling, handling money, hiring, signing papers of all kinds. Running a business as a minor would be like a blind person driving in a grand prix road race. The business should be placed in the minor's ownership under some kind of custodial arrangement, or perhaps sold and the proceeds be put in a custodial account.

Re: Minor Owning a Business

Yes, there is no reason he cannot own the business. His tax rate would most likely be the same as yours (assuming you are in a higher bracket then him).

However, there are a variety of reasons why giving him the business outright is probably not a good idea. Holding the business in trust or through some other technique will allow safeguards and protections to be placed that protect the business (and your son) until he reaches an age that he is capable of running it himself (if he so chooses to). There are also issues with the business structure and continuity, as well as potential tax ramifications depending on the size and nature of the company.

You should speak to an estate planning attorney, who is also versed in tax and business law. Preferrably someone who has experience with Business Sucession. My website has more information on all of these topics (you can find the url through my link).