Who Can Own a Business?
Ownership of LLC's, S Corporations, Corporations
Who can own a business? This might seem like a silly question, but it isn't. Some types of individuals and other business entities can own a business, but there are limitations and restrictions on who can own a business.
Can a Non-U.S. Citizen Own a Business in the U.S.?
Yes and no. As discussed in Entrepreneur, if you are not a U.S. citizen, you can own a business in the U.S. if you have a green card as a permanent resident or if you have specific types of visa (E-1 or E-2). Having an ITIN (ID card) isn't enough to qualify you to own a business.
But, a non-resident alien may not be a shareholder of an S corporation.
USA Corporate Services provides more detailed information on various types of visas and their eligibility for opening a business in the U.S. And, the U.S. Citizenship and Immigration Services (a part of Homeland Security), has an Entrepreneur Visa Guide that can help you get started.
Can a Child Own a Business?
There is no federal restriction on children participating in a business, including an LLC, S corporation, or partnership. But most states require that the principal owners (decision makers) of a business be over age 18.
Before you include a child in a business, take into account the implications of having a minor in a business situation. A contract with a minor is not binding because the child is not legally competent to enter into a contract and can disavow the contract, leading to difficult legal situations. This includes signing for business loans, leases, and vendor or customer contracts.
A child should not be the sole owner of a business, for the reasons noted above. Have someone else do the day-to-day decision making and contract signing. The concept of "apparent authority" works here. Apparent authority means that someone could reasonably infer that someone (a child, in this case) has authority to act and bind the business to a contract.
Who Can Own an S Corporation?
The S corporation has several restrictions on ownership. This business form was created to give business owners an opportunity to benefit from this cross between an LLC and a regular corporation, but that benefit isn't conferred to everyone.
Like a corporation, an S corporation has shareholders as owners. These shareholders cannot include:
- Non-resident aliens, (as noted above), or
- Partnerships or corporations.
These ownership restrictions also apply to LLC's that elect S corporation status.
The IRS does allow "certain kinds of estates and trusts" to be shareholders of an S corporation.
Can a Business Own Another Business?
In many cases, a business can own another business. The most common type of business ownership of another business is a subsidiary company.
An LLC that elects to be taxed as an S corporation must adhere to the same restrictions on ownership as the S corporation, in terms of non-resident aliens and the restrictions on partnerships and corporations owning S corporations.
Can an Estate or a Trust Own a Business?
First, let's define the term "estate." An estate is the ownership of assets, or all the money and property owned by an individual person; it's also the net worth of the person, including both what is owned and what is owed. We usually refer to an estate as the assets in a will at the time of someone's death. An estate can be held in a person's name, or it can be held in a partnership or in some other arrangement.
A trust is an entity that manages assets, in a similar way to an estate manager.
An estate typically has an executor or administrator, who manages the assets of the estate. The estate may make investments, including investing in real estate. An estate can invest in a business as a shareholder or partner. In the case of a partnership, the estate would be a limited partner.
As noted above, an estate or trust cannot be a shareholder of an S corporation.