How Much Anonymity do Anonymous LLC’s provide?

I’ve written in the past about anonymous LLC’s. See the list of blog articles here. What I’m often asked, is just how much anonymity is provided by Anonymous LLC’s, and I think the topic is good enough to write a blog article focused on it (I know, about time).

It’s really interesting talking to people about their needs or desires for privacy. The following is a list of goals that Anonymous LLC are particularly well-suited to help with:

• To prevent people from simply looking up ownership information on the Internet.
• To prevent stalkers, criminals and others with malicious intent from easily identifying “who you are” and potentially harassing (or worse) you or your loved ones.
• To protect owners of companies and/or real property.
• To conduct business without worrying about the “fallout” from being associated with that business.

The above reasons can help all sorts of individuals who have legitimate reasons for anonymity, including:

• Abuse victims who wish to prevent their abusers from looking them up.
• Property owners who wish to limit the ability of tenants from bypassing property managers.
• Famous individuals and public figures who wish to limit personal harassment, or otherwise frustrate overzealous fans from showing up on their doorstep or stalking them.
• Business owners who, due to their nature of their business, wish to avoid customers or other third-parties from figuring out where they live and harassing them and their families.
• Entrepreneurs who wish to step away from their current employer or employment, and wish to avoid the awkwardness of having to explain what they’re doing “on the side” to their employer.
• Investors and business leaders who want to experiment in a new market or business line, without tarnishing the brand or reputation of their existing business(es).
• Investors who wish to keep secret the businesses they are investing in.

It’s important to keep in mind that American values rest upon the laurels of freedom, a Republican Democracy, and an innate right to privacy. Anonymous LLC’s, therefore, are fundamental to maintaining the American values (and dream) for many.

With that said, there is also a strong public interest in maintaining public safety, and that means preventing criminals, terrorists and nefarious third-parties from using our legal system and instruments to do harm to others. This means that Anonymous LLC’s cannot provide perfect anonymity (which is a good thing — think about it). For example, Anonymous LLC’s won’t help with:

• shielding oneself from criminal liability for criminal activity
• tax evasion
• remaining anonymous with the IRS and/or banks
• attempting to prevent oneself from being sued

Normal individuals and business leaders with a legitimate need for privacy need to know the boundary between anonymity and disclosure of personal information. Here are the parameters of that boundary:

• The IRS will Know. If you want a bank account in the name of your Anonymous LLC, the Anonymous LLC will need a FEIN. To obtain a FEIN from the IRS, the IRS will require disclosure of a “Responsible Party,” who must be an entity (person or company) that either owns or controls the Anonymous LLC and already has a Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or Federal Employee Identification Number (FEIN). This information is supposed to be kept private. Learn more about Responsible Parties and Nominees at the IRS.
• Banks will Need to Know. Banks are under federal regulations to identify the signatories of bank accounts. Therefore, the individual signatories on a bank account will need to properly and legally identify themselves when opening up a bank account (after you have formed your Anonymous LLC and obtained a FEIN from the IRS). Banks are supposed to keep this information private. If you find a service somewhere that is willing to do this on your behalf, without you being present at a bank — BEWARE — you may be dealing with a criminal organization.
• Contracts Need Signatures. It is customary that a contract involving any LLC (including an Anonymous LLC) has the legal name of the LLC as a party to the contract. When you execute that contract, a signature is required, along with an identification of the actual name of the party signing and their position within the company indicating authority. In doing business with others, you should do a few things to preserve your anonymity.  For one, simply put “Member” or “Authorized Representative” down for your printed name and title, and sign your name.  Alternatively, if you’re going to put your name down, make sure the contact has a confidentiality clause with liquidated damages for improper disclosure.
• Personal Guarantees, Loans, Mortgages and Lines of Credit Need Personal Information. I think this goes without saying, but I just want to remind you about this. Most landlords for commercial leases will demand personal guarantees when a LLC (including an Anonymous LLC) is listed as the tenant. Again, make sure there is a confidentiality clause as against the Landlord AND their representatives, agents, contractors, employees, etc.
• Courts can Issue Subpoenas. All third-parties you do business with are subject to the legal system, including the subpoena power of the courts and numerous federal and state agencies, depending on the issues and subject matter. As a law firm, our clients enjoy some level of attorney-client privilege and attorney-client confidentiality, but this is not absolute. Even as an attorney, we are bound by the courts in the states we practice, as well as most agencies at the federal level. Your organizer, registered agent and mail provider for the Anonymous LLC are all subject to subpoena power of the appropriate and relevant legal process, and your personal information can therefore be exposed in any legal action.

At the end of the day, an Anonymous LLC prevents people from looking you up on the Secretary of State’s website.  That’s really it.  You cannot prevent the IRS or your bank from knowing who you are (but both are supposed to keep that information private).  There are many ways to torpedo the anonymity of an Anonymous LLC, and we’ve seen clients lose it because a family member posted a “congrats” in social media, or because they’ve used an old domain name for their website where that domain name had their personal information attached to it.

Finally, I’m often asked whether offshore companies and/or LLC can provide a greater degree of anonymity, and the answer is “it depends.” If you’re actually conducting business, the answer is “no.” The reason is because all states require registration if you’re “transacting business” in their state, and if you want a bank account, you still need to deal with the IRS and the signatory requirements of the banks. If you’re not conducting business, and merely looking for some sort of “holding entity,” then “maybe,” depending on a lot of circumstances. This is where I recommend you seek the advice of a competent CPA and/or business attorney.

Law 4 Small Business, P.C. A little law now can save a lot later.