Anonymous LLCs and Corporations – Part 2

As a follow up to my prior post, this article will continue a look at common myths held by people seeking complete privacy and asset protection through anonymous ownership of limited liability companies, corporations, and other entities.

Myth:  If you organize your company in Nevada you are able to enjoy complete privacy

Some of the advantages of organizing in Nevada that help provide privacy include:

  • The State does not require the names of corporate stockholders or members of LLCs to become part of the public record. Nor do the shareholders and members have to be disclosed on any annual filings with the State.
  • Nominees for corporate officers and directors or the managers of LLCs may be used.
  • Unlike the majority of states, and along with a few other states, Nevada does not maintain a data sharing agreement with the Internal Revenue Service. This does not mean that you may not have to give the IRS your personal information since the individual responsible for tax matters is required to provide the IRS his or her Social Security Number and name in order to receive an EIN.
Seeking Anonymity

Even though a certain amount of privacy can be maintained with the Nevada Secretary of State, there are several ways in which ownership information may be required to be disclosed.  For example, you may be required to disclose ownership information in order to obtain a state business license or open a bank account.  Or if you are attempting to obtain a loan, the lender may require individual information since you are likely going to be personally guaranteeing the loan as the owner of the business.  As the business owner, if you do not take an active role in the business’s operations, but rather employ managers, etc., you may avoid having to disclose ownership information in many of these situations.

Myth:  The use of nominees provides a bullet-proof method for privacy

If any online incorporation service touts using nominees as some magic, bullet-proof strategy for privacy and protecting assets, be very skeptical.  Just remember that there is very little that is bullet-proof.  This is true even though as mentioned above, Nevada allows for the use of nominees for directors, officers, and managers.

While it’s true that the use of nominees may help you conceal your identity on the Secretary of State’s records, piercing that privacy is fairly easy.  Once the nominee receives a subpoena requesting the contact information of the actual owner, the nominee may be required to provide the information and the privacy is gone.  And the nominee is not going to want to be held in contempt for failing to respond to the subpoena.

Myth:  The use of bearer shares protects assets

If you run across a website that still promotes the use of bearer shares as a way to protect assets and the identity of the owners, click away!  Since 2007, both Nevada and Wyoming, the last two states that used to allow bearer shares, both passed legislation that specifically prohibits their use.  This simply is not an option anymore.

Asset protection is a real concern in today’s litigious society.  There are several legitimate asset protection techniques that may be used.  And it may also make sense to seek privacy when organizing a corporation or LLC in Nevada.  But when doing so, it is also important to keep in mind the limitations as discussed in the above myths.  If you would like to discuss how to best maintain such privacy, please give our firm a call.

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