Posted 3 months ago
Privately Form a Limited Liability Corporation
This is a follow up to our previous post on the importance of privacy. That post focused on privacy as a general concept, this post will focus specifically on how to form a company and keep its ownership structure private. We will not delve into offshore shell companies etc., but will stick to best practices which every attorney can utilize in their practice.
Let us use Webster’s definition of privacy, “freedom from unauthorized intrusion”. Note the word “unauthorized”. These tactics are not meant to promote complete privacy in the sense no one, not even the government, is aware of what’s going on. That level of secrecy is unrealistic and ultimately just asks for trouble. Just look at the Panama Papers for an example of seemingly secure offshore businesses dealings being made public. Our motto is that it’s better to hide in plain sight (legally).
The focus here is on minimizing what information is publicly available. Several states, such as Wyoming, Nevada and New Mexico, to name a few, allow the owners and managers of LLCs to remain private. That is, their information is not filed with the state and only the LLC’s organizer knows the owner. Corporations can attain a similar level of privacy through the use of a nominee officer service. This means neither the owners, nor managers, of a limited liability corporation are ever listed in a public or state database. And in the case of a corporation, the nominee officer’s name is listed.
What states offer private LLCs?
As a Wyoming law firm we advise clients to domicile here. If you wish to know more about our state’s offerings and how to form a private WY LLC then
follow the link. Those interested in other states will find Google a willing friend. There are countless providers offering private or anonymous LLCs.
In case one should wonder, we have a general right to privacy in that we are not compelled to publicly broadcast our assets and private affairs. This privacy can be used to keep away pesky neighbors, needy family members and overly zealous creditors.
What about setting up an EIN?
To engage in any taxable activities or financial transactions a company must obtain an Employer Identification Number. This EIN must either be tied to a SSN or another EIN. This creates a paper trail and thus accountability through tying the actions of the corporation to another corporation or an individual. Nominee officer services are often available for obtaining EINs. This adds an additional layer of privacy, but ultimately the corporation obtaining the EIN on the client’s behalf will ask for sufficient documentation to verify who they are doing business with.
This method obviously works well for those living in one of the aforementioned states. It also stands to benefit those willing to domicile their holding companies in one of these strict privacy jurisdictions. These holding companies can be listed as the owner of the local operating company. An alternative is to form either a revocable living trust or irrevocable trust and to list the trust as the owner on all LLC documents. The revocable trust is the simplest arrangement here as it’s a disregarded entity for tax and liability purposes.
We hope these two methods for privately forming limited liability corporations will be useful for you and clients. Our preferred method is to choose a state with privacy, Wyoming for us, rather than going through the added complexity of forming a trust. Ultimately, though, a client needs to choose what is right for them and to fit it into a larger corporate structuring and wealth management strategy. In fact, upon further analysis, some clients may even decide they do not desire the added privacy, to say nothing of the extra effort and cost required to obtain it. Should you decide to proceed, then we are willing to assist. We will happily allow you to resell our services under your label, essentially acting as your back office for the tedious forming of the llc, and you handle any value-added services for the client.
Thanks for reading and have a great day!
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