Anonymous LLC’s are Still Useful Under H.R. 2513, the Corporate Transparency Act of 2019
First, the good news: the Corporate Transparency Act of 2019 (HR 2513) does not eliminate the usefulness of our Anonymous LLC. Our Anonymous LLC is designed to keep personal ownership information off the Internet, so members of the public cannot lookup ownership information. The Corporate Transparency Act of 2019 (HR 2513) does not permit members of the public to lookup ownership information.
It was signed into law in early 2021, although as of the March 2nd, 2021, we still don’t know where or how to submit the required data. Once we learn of this, we’ll post a relevant link here.
What is the Corporate Transparency Act of 2019 (HR 2513)?
The U.S. House of Representatives recently passed H.R. 2513, titled “Corporate Transparency Act of 2019”, for the purposes of:
“To ensure that persons who form corporations or limited liability companies in the United States disclose the beneficial owners of those corporations or limited liability companies, in order to prevent wrongdoers from exploiting United States corporations and limited liability companies for criminal gain, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations and limited liability companies, and for other purposes.”H.R.2513 – Corporate Transparency Act of 2019
What this really means, is that the Congressional Representatives who voted for this Act really didn’t do their research and really don’t know how things work.
For example, consider the Enron Scandal. It was a public company that basically kept two separate sets of books, using complicated accounting loopholes, special purpose entities and poor financial reporting to artificially inflate its market value.
Criminals will lie, cheat and steal. It’s what they do. Sending fake ID’s to “identify themselves” is second nature.
Honest, fair, law-abiding Americans don’t lie, cheat or steal. But, they do have legitimate needs to conduct business privately. They own businesses that cater to the far-right or far-left, subjecting themselves and their families to harassment, intimidation or violence. They are former abuse victims trying to hide from their former abusers. They are entrepreneurs trying to experiment without creating embarrassing situations with their employers or family.
H.R. 2513, the Corporate Transparency Act of 2019 Circumvents the Normal Legal Process
No one who owns a company can move money around in the United States today, without properly disclosing a “Responsible Party” (who must have a valid social security number or international taxpayer identification number) to the IRS to get a federal employee identification number (FEIN), which is required to open a bank account in the name of the company.
Law enforcement and the courts ALREADY have a means to identify owners of a company: They can issue a lawful subpoena or court order to the IRS, a bank if known, the registered agent of the company (which is required for all companies), or any person or company they know is working with, or connected to, the company in question. If someone is concerned with real property, they can have a sheriff literally walk on to the property and staple a notice to appear in court.
What is required today – without H.R. 2513, the Corporate Transparency Act of 2019 – is a lawful court order or legal basis to issue a subpoena. That’s literally it.
What the Corporate Transparency Act of 2019 does, is make it easier for (1) a “local, Tribal, State, or Federal law enforcement agency,” (2) a “Federal agency on behalf of . . . a foreign law enforcement agency,” or (3) a “financial institution, with customer consent”, to be able to access such information – with criminal penalties for misuse or unauthorized disclosure of such information. Instead of filing a lawsuit, a law enforcement agency can merely query the FinCEN database under the Corporate Transparency Act of 2019.
Some Basic or Important Facts About H.R. 2513, the Corporate Transparency Act of 2019
Question: What does this Act require of companies?
Answer: All small companies (with some exceptions not relevant to most small companies), are required to disclose “beneficial ownership” to FinCEN vis-à-vis a report that contains full legal name, date of birth, contact info, and a valid ID number of either a passport, driver’s license or personal identification card (issued by a State). This information must be updated yearly.
Question: What defines or constitutes a “small company” as mentioned above?
Answer: All companies that (i) employ 20 employees or less, (ii) file income tax returns with $5 Million or less in gross revenue, OR (iii) does NOT have an “operating presence at a physical office” within the US. “Operating Presence” is not defined within the Act, and will no doubt become the subject of litigation.
Question: What defines or constitutes a “beneficial owner” as mentioned above?
Answer: Anyone who, directly or indirectly, regardless of the arrangement (i.e. contract, understanding, relationship, etc), (i) exercises substantial control over the company, (ii) owns 25% or more of the company, OR (iii) receives substantial economic benefits from the assets of the company. There are exceptions, such as a minor child, persons acting on behalf of another person properly situation (i.e. nominee’s, intermediaries, custodians, agents), employees, creditors and persons whose interest is merely right of inheritance.
Question: Can I simply hire a “nominee” to report their information instead of mine?
Answer: No. Beware of “nominee services,” they are illegal at worst and can subject you to unwanted or unanticipated liability at best. The Act is written to require disclosure of anyone attempting to hide behind such persons.
Question: I’m not a US-citizen. How am I, as a foreign national, supposed to comply with these requirements?
Answer: The Act provides that foreign nationals can submit the required information, along with (i) a ID from “a non-expired passport issued by a foreign government,” and (ii) a “legible and credible copy of the pages of a non-expired passport issued by the government of a foreign country bearing a photograph, date of birth, and unique identifying information.” The Act also requires a “written certification” from someone in the State where the entity is formed, to (a) maintain a copy of this information, (b) verify the full legal name, address and identity of such foreign “beneficial owners”, and (c) keep this information on file for 5 years AFTER the company TERMINATES.
Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.
If an anonymous LLC is set up but registers as a foreign LLC to conduct business in another state, FL for example, the ownership information will be disclosed in FL, correct?
If this occurs, is it possible to regain anonymity in the future through forming a subsidiary LLC or stop conducting business in FL?
Yes, you generally have to disclose ownership information for a foreign filing in states that require disclosure of ownership information (i.e. like FL).
As it relates to “regaining anonymity?” The answer is “yes,” although there are some limitations and gotchas. Please read a previous blog article I wrote on the subject.
Thank you. Larry.