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I am a minor and my mother would be signing both the incorporation documents, I am under the impression there is no problem there as she would have no role.

Since she signed these documents, does she hold any additional duties or responsibilities as a result of that signature? How can she relinquish those responsibilities?

  • She may be legally responsible for the actions of the company, depending on what type of company is formed. She may also be financially responsible since you cannot. She can transfer things over to you when you are the age of majority, but transferring bank accounts and debts is a little more difficult than just signing a piece of paper. – Ron Beyer Jul 30 '18 at 2:17
  • So if it is a C-corp and I will be 18 about 3 days after the signature? – Outsider Jul 30 '18 at 2:37
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    Wait 3 days, the headache is not worth the extra time. – Ron Beyer Jul 30 '18 at 2:39
  • We cannot we have some specific problems one being my co-founder will be a minor for another 1.5 years. – Outsider Jul 30 '18 at 2:42
  • Then it is a contract between your parents, and they should be consulting a lawyer. A minor cannot hold shares in a company. Starting and being partners in a business is, in some ways, worse than being in a marriage. This is even worse with a C-Corp. You will need a couple hours with a corporate attorney anyway to structure this so things fall over to you and your friend. – Ron Beyer Jul 30 '18 at 2:46
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Running a C-Corp is no easy matter, I would suggest first you look very hard at why you want to do a C-Corp vs an LLC with an S-Corp election. There is a lot of documentation/formalities that if not followed allow somebody to "pierce the veil" and bind the principles legally. You also miss out on tax savings opportunities with recent legislation and subject yourself to double taxation, which is beyond the scope of this question. Think carefully.

To answer your question, the person who signs the documents is the founder/former of the corporation. You can file paperwork to remove that person from the corporation, however in your case I would not do that, and here's why...

One of your principle shareholders will be a minor. A minor cannot be held to the same contract standards as majority adults. This means that many organizations that would otherwise gladly do business with you (like a bank account) will immediately turn away. You need an adult to bind the company and all the principles should be legal adults. You cannot allow your minor business partner to be part of any contract or a party to a signatory on a contract.

Yes, a minor can hold "shares" of a corporation, but they are severely limited in that they carry no voting rights. They do give the holder dividends, but there are tax implications there too that the corporation needs to be careful of.

You will need to disclose that your business partner is a minor in your dealings, not doing so can open you up to all kinds of trouble. That alone is enough to make many organizations walk away. I would suggest that you keep all your principles as majority adults and draft documents that transfer the shares to the minor upon the age of majority.

  • I have done extensive research based on our business C-corp makes sense. Are you sure minors do not have voting rights? "Minors have the right to vote in the general body meeting and the voting rights will depend upon the proportion of shares the minor holds within the company" Link:vakilsearch.com/advice/… – Outsider Jul 30 '18 at 15:28
  • Anyway, so the only problem would be that a minor is not legally binding. Therefore How can we set up the company so that I, 18yr, can make all decisions on behalf of the company? Would I have to be the majority shareholder, therefore, having most voting rights? Does the position of Executive matter in any of these case scenarios? – Outsider Jul 30 '18 at 15:31
  • You can set it up so they have voting rights, however whatever they vote on may be legally binding, so it should be an "all or nothing", and in this case, "nothing" since the minor should not be a party to legal issues in the company. So yes they can "vote" but those votes coming from a minor being a party to a contract issue means that the contract can be void if the minor decides it regardless of how many shares. The same problem holds true if they are a principle in the company, I hope you can see the issue there and why most corporations will not give voting shares to minors. – Ron Beyer Jul 30 '18 at 15:38
  • Given this should I be made majority shareholder and voter in order to ensure all contracts and agreements are binding? – Outsider Jul 30 '18 at 15:42
  • Not a "majority voter" but the voter. You should not give the minor voting rights until they become of age. If required have the parent hold the shares of the minor until they become of age, or you need to issue a separate class of shares that are non-voting but convertible to preferred stock. – Ron Beyer Jul 30 '18 at 15:46

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