The Florida Double LLC is Double Trouble
The right and ability to conduct business anonymously is very important to some. This is why we’ve offered one of the safest, and arguably, most legal, anonymous LLC set-ups in the business — for about the same price as “the other guys.”
Although “hidden shell companies” receive bad press and a negative political narrative, the fact of the matter is criminals and terrorists will simply lie on the forms, and list fake names as owners of their companies. This information is simply not verified at the state level. Therefore, only legitimate, law-abiding citizens are hurt by state requirements to disclose ownership information.
Furthermore, it’s almost impossible to obtain a bank account, without disclosing legitimate information to the banks and the IRS. Therefore, it’s really difficult to become a tax cheat or hide money in the US. Don’t believe what you read about “hidden shell companies” or other private companies that hide the legitimate owner(s).
You think there’s no legitimate need to hide ownership information on a company? Think again. Our clients include abuse victims desperately trying to remain hidden from their former abusers. We also have clients in businesses that are harassed by the far left or far right in politics (think gun shops, reproductive rights and businesses that cater to the LGBTQ community). There are literally hundreds of legitimate reasons why law-abiding citizens may not want their personal names and information disclosed as an owner for a particular company. Read my previous blog article entitled, Panama Papers: A Lawyer’s Perspective, for more perspectives on this issue.
What is the Florida Double LLC?
Unfortunately for many individuals, their pursuit for anonymity and privacy will have them finding illegitimate solutions to this problem that will expose them to very real legal problems down the road. One of those illegitimate solutions comes in the form of “The Florida Double LLC”. This gem of an offering is provided by a company that actually says, “The only way to stay anonymous in Florida is by forming two LLCs that own each other.” These folks are clearly not a law firm, nor are they offering sound legal advice. Your first sign of trouble should be the lack of any specific information about this company, whatsoever, such as who owns the company or who are its founders.
This is just another example of legitimate business owners being taken advantage of. I wrote a knowledge base article that touches on why our law firm is better than the unlicensed legal providers (read the article), but this article really applies to any lawyer or law firm versus other providers on the Internet. Simply put, don’t rely on no-name vendors — find a legitimate business lawyer or law firm to help you.
In the case of this “Florida Double LLC,” what this company is doing, is creating two separate LLC’s and setting it up so that each LLC owns the other LLC. Because Sunbiz doesn’t verify or validate the information submitted to it, each company shows the other company as its owner in Sunbiz. Ta-da, anonymity problem is solved.
Unfortunately, the long-term legal problems have only begun.
The Legal Problems Associated with the Florida Double LLC
The first, most obvious, and biggest problem with the Florida Double LLC, is that such a set-up can expose you to personal liability. See Fla. Stat. Ann. § 605.0205, Liability for inaccurate information in filed record. If this statute is invoked in a lawsuit against the LLC, the liability protection afforded the LLC will almost certainly be pierced — exposing anyone affiliated with the LLC’s to personal liability.
How can this statute be invoked in a lawsuit? The answer depends on whether you’re personally set-up as the Member or Manager of these LLC’s.
If you’re set-up as the Member of these LLC’s, the questions becomes, how are YOU (and any other owners) possibly exerting any sort of control or influence over the LLC’s? How are YOU (and any other owners) receiving income from these LLC’s? Finally, how are YOU (and any other owners) reporting taxes?
The answer to these questions, if the LLC’s are legitimately set-up using accurate information submitted to Sunbiz, should be “no, you’re not doing those things.” You’re not exerting any sort of control or influence over the LLC’s, you’re not receiving any sort of passthrough, distribution or owner-based compensation from the LLC’s, and you’re not reporting taxes at all, because you’re not a Member of the LLC’s.
If you’re set-up as the Manager of these LLC’s, we don’t have the control question anymore, but we do have the other two questions: How are YOU (and any other owners) receiving income from these LLC’s? And, how are YOU (and any other owners) reporting taxes?
The only way this can be a legitimate set-up, is to answer these questions as we have above. That you are not receiving income nor reporting taxes. But, then who is?
As an attorney, I relish an opposing party so set-up. We lawyers eat this stuff up like candy.
The second problem touches on what I mentioned above. Taxes. Just who is reporting taxes for these LLC’s? Where does the income go? What do you put down, on a W9 if the LLC is going to receive income from a third-party? Box #1 on the W-9 requires “Name (as shown on your income tax return)” for whatever entity will be reporting the income.
Don’t think for a moment, that a plaintiff’s attorney will not demand the tax forms of the LLC’s if they are involved in a lawsuit. Also, don’t think you can hide your income from the IRS. Your clients are submitting 1099’s to the IRS, the banks are submitting 1099-INT’s and 1099-DIV’s to the IRS, and merchant account providers (i.e. the companies, including Amazon and PayPal that you use to accept credit cards), are filing 1099-K’s to the IRS.
The Only Legitimate Way to Set Up an Anonymous LLC or Private LLC in Florida
The “Florida Double LLC”, as sold by our competition, will only create long-term legal problems for their owners. The only legitimate, legal, long-term solution to maintain your anonymity in Florida (as well as any other state where anonymity isn’t permitted), is to set up a proper “parent/child” relationship between two LLC’s. Specifically, one sets up a child Florida LLC, and that is the company you conduct and transact business with. That child is owned by an anonymous holding company, acting as a parent of the Florida LLC. The holding company does not transact business. It’s sole purpose is “Owning and controlling a subsidiary corporation incorporated in or transacting business within this state“, in compliance with Fla. Stat. Ann. § 607.1501(2)(k).
There is no short-cut to save money when trying to remain anonymous. You must have two separate companies, one of them an out-of-state company that permits anonymity (i.e. such as from New Mexico or Wyoming). You must pay for two separate registered agents. You must also obtain a separate mailing address, in compliance with Florida state law, that cannot be the registered agent’s address (read why).
Finally, be careful you who you do business with. Only a lawyer or law firm can provide attorney-client privilege and confidentiality, and only a lawyer or law firm will recommend sound legal solutions designed to protect you in the long-term — not short-term, quick fix solutions with a false sense of accomplishment.