Regular LLC versus Anonymous LLC
What is a LLC?
A limited liability company (LLC) is a form of business entity that is permitted in all 50 states. Many small businesses prefer LLC’s over corporations because of their flexibility, low-cost and ease to maintain.
Limited liability company regulations vary from state to state, and you must follow the requirements of the state you are forming it in. All states require you to identify the Registered Agent and the Organizer on your LLC application and most also require you to identify either the managers or the members of the LLC. However, not all states require that you disclose this information, hence the phrase “anonymous LLC”.
What is An Anonymous LLC?
What is the difference between a “regular LLC” and an “anonymous LLC”? An anonymous LLC is actually a regular LLC that has been created in one of the states that does not require you to disclose the managers or the members of the LLC. There is no legal difference between a “regular LLC” and an “anonymous LLC”. However the “anonymous LLC” does not disclose the ownership information of the LLC. You will also see anonymous LLC’s referred to as “private LLC’s” and “confidential LLC’s” on the Internet.
States do not offer or provide “anonymous LLC’s”. If you call your home state’s secretary of state and ask for help on how to form an anonymous LLC, they probably won’t know what you’re talking about.
Misconceptions To Understand
A quick Google search for ‘anonymous LLC’ reveals a spattering of misinformation. Here are some of the most ridiculous ones debunked:
- Anonymous LLC’s Allow Tax Avoidance. FALSE- Anonymous LLC’s are taxed the same as any other LLC. That said, LLC’s do offer tax advantages for business owners.
- Anonymous LLC’s are Totally Untraceable. FALSE- The average person will not find out you own the company. However, if used improperly LLC’s are subject to piercing the corporate veil.
- Anonymous LLC’s are Shady. FALSE- Choosing an anonymous LLC is a great option for anyone looking to preserve their privacy,
and we have many clients choosing anonymity for legitimate reasons, including victims of previous abuse or harassment, landowners and property owners trying to avoid tenants from bypassing landlords, greater asset protection, competitor avoidance, and more.
What States Have An Anonymous LLC?
How does one form an anonymous LLC? In order to have an anonymous LLC, you must form said LLC in a state that does not require you to disclose the members or managers of the LLC. The most popular states for anonymous LLC’s are Delaware, Wyoming, and New Mexico.
- Advantages to Delaware and Wyoming- no corporate income tax! (Great for Subchapter-C taxable entites)
- Disadvantages to Delaware and Wyoming- In Delaware, ownership information is disclosed to the state, though not published. Future changes in law could allow this information to be public. Both states require annual reports and annual franchise fees.
New Mexico is preferred for those individuals who value privacy above all else.
- Advantages to New Mexico- New Mexico does not require ownership or management information to be submitted to the state at all, and there are no annual reporting requirements (or fees!). New Mexico doesn’t have ownership information to publish, even if it wanted to publish such information or changes its laws in the future.
- Disadvantages to New Mexico- there is a corporate income tax. However, this is not really important for sole-member LLC’s and other pass-through entities (i.e. LLC’s being taxed under Subchapter S or as a partnership), because such LLC’s do not pay income taxes themselves. The IRS treats sole-member LLC’s as “disregarded entities,” which means their profits, losses and expenses simply flow through to an individual on “Schedule C” of their Form 1040. For other pass-through entities, such LLC’s will need to file a zero-tax tax form in New Mexico. The LLC’s profits and losses flows through to the member(s) on a Form K-1, so the LLC doesn’t pay income tax itself, although any members living in New Mexico may have to pay their pro rata share of income tax as a resident of New Mexico. We recommend consulting with a CPA who can help you manage your taxable footprint.
Should You Use a Lawyer?
Lawyers can do three things that no one else can do for you:
- Provide attorney-client privilege;
- Provide attorney-client confidentiality; and
- Make sure things are done right, and consult with you
For about the same price as everyone else, but with the advantages above, Law 4 Small Business offers unique expertise on forming an Anonymous LLC.
Our unique experience allows us to make sure your LLC is filed right- the first time. Don’t risk your privacy. Additionally, we can pair your new Anonymous LLC with our Registered Agent and Virtual office services, offering another layer of privacy.