Anonymous LLC States: Everything You Need to Know
Anonymous LLC states are those where LLCs are being formed that do not require the owners/members or managers to provide their identities.7 min read
Anonymous LLC states are those where LLCs are being formed and do not require the owners/members or managers to provide their identities. Hence, the name used is "anonymous LLC." An anonymous LLC may also be referred to as a "confidential LLC" or a "private LLC."
Benefits of Anonymous LLC States
There are several benefits for registering as an anonymous LLC rather than as a public entity.
- For legal purposes, there is no difference between registering an anonymous LLC and a regular LLC where identification information is supplied.
- LLCs are flexible by allowing partners to join companies at different stages.
- Most states require that identities be disclosed not only for the member and managers associated with the LLC but also for the Registered Agent and the person(s) responsible for organizing the LLC.
- Registering as an anonymous LLC helps prevent potentially dangerous individuals, such as stalkers and criminals, from having access to your information to use in a malicious or harassing manner.
- An anonymous LLC owner can conduct business without being associated with any negative fallout that may be generated from the business.
- An anonymous LLC receives the same benefits as those provided to a regular LLC. Benefits include tax advantages, flexibility, survivability, and limited liability protection.
Information About Contracts and an Anonymous LLC State
- When dealing with contracts, it is customary for the legal name of the LLC to be included in the contract.
- When the contract is executed, the person designated for the LLC must provide a signature, name, position within the company, and appropriate identification.
- You can preserve your identity by putting "Authorized Representative" or "Member" on the form where it asks for your name and title. You would then sign your name.
- If your name is put on the form, check the contract to make sure a confidentiality clause protecting your identity is included before signing. There should also be specified liquidated damages in the event that your personal identity is disclosed.
- When dealing with commercial leases, it is common for a landlord to require personal guarantees for any anonymous LLC tenants.
- In a contract with a landlord, be sure a confidentiality clause is clearly stated in the contract that not only holds the landlord responsible for disclosure of your personal identity but also his employees, agents, contractors, representatives, and anyone else affiliated with the landlord who would have access to the confidential information and could disclose it.
- Anonymous LLCs are taxed just like any other LLC.
Cons of an Anonymous LLC
There are a few things to consider that may have a negative effect on an anonymous LLC.
- Registering as an anonymous LLC does not guarantee complete anonymity from your bank or from the Internal Revenue Service (IRS).
- It does not exclude the business from paying taxes.
- As an anonymous LLC, the business is subject to lawsuits and, through a subpoena filed by an attorney, can be required to identify the owners.
- Any third-party person or organization doing business with an anonymous LLC is subject to the legal system of the state. This means a third-party can be subpoenaed by the court as well as state and federal agencies.
- A Federal Employer Identification Number (FEIN) is necessary to open a bank account if you plan to open an anonymous LLC. You can apply online for a number on the IRS website.
- To open a bank account for an anonymous LLC requires that you have a Federal Employer Identification Number (FEIN), also referred to as an EIN. Banks are required to identify those authorized on a bank account due to federal regulations.
- Information required to obtain a FEIN includes the name of the business owner or the person controlling the anonymous LLC, an Individual Taxpayer Identification Number (ITIN), Social Security number, or FEIN.
- The registered agent, organizer, or mail provider for your anonymous LLC could be subpoenaed and also expose your personal information during litigation.
- Which states allow anonymous LLCs?
Delaware, Nevada, New Mexico, and Wyoming.
- Is my bank required to keep my identity private when I open a bank account for my anonymous LLC?
Banks are responsible for keeping this information private. If you find a company or service willing to permit the opening of a bank account without your being present, beware as this could be a fraudulent organization.
Benefits of an Anonymous LLC
Many small businesses like an LLC over a corporation because it's flexible, inexpensive, and easy to maintain. It's also a cost-effective way to ensure your company survives your incapacitation or death, which is a benefit to your estate or family. With LLCs, you can separate business functions and/or key assets, which gives you the flexibility to vary the ownership of each. You can merge or liquidate these assets or functions easily as compared to them being one large whole.
With an anonymous LLC, there are additional unique benefits like confidentiality, privacy protection, and harassment prevention. Because ownership is not publicly available, they are privately protected. Someone cannot go look up an anonymous LLC's list of owners, which is what helps prevent them from being harassed due to a variety of different issues. There is typically more trust and a higher level of confidentiality between members because business deals are done in an anonymous manner.
People who have been victims of abuse often prefer an anonymous LLC because it allows them to remain hidden. His or her abuser cannot look up their information. Other people who are celebrities or public figures who want to limit harassment or keep overzealous fans from showing up on their doorstep are also ideal candidates for an anonymous LLC. Some business owners who may run a controversial type of company may prefer an anonymous LLC as well, as they want to keep customers or protestors from finding out where they live and harassing their families.
Another type of business owner who might prefer an anonymous LLC is an entrepreneur who is looking to leave their current job and wants to avoid any awkwardness on what they are doing on the side. This gives them the freedom to seek investors and work on a new product or service without risking their standing with or the reputation of their current employer.
Which States Are the Best to Form an Anonymous LLC In?
Because there are only four states that permit anonymous LLCs, your options are limited. Delaware is one of the best options, and it is the only state that has the Court of Chancery that is streamlined and dedicated to business matters. The state laws offer additional personal liability protections and are vigilant about keeping fraudulent LLCs out of Delaware.
There is no corporate income tax requirement, but Delaware does require a yearly $300 franchise tax. It does not require businesses to list the names of directors, officers, corporation shareholders, and LLC members and managers. However, the Articles still mandate you name a registered agent and an organizer/incorporator. This means that in order to have total privacy, you will need to hire third parties to serve in these roles.
If confidentiality and privacy are your top concerns, New Mexico is another excellent option. Of the four states where anonymous LLCs are allowed, New Mexico is the only other one that doesn't require an LLC to disclose any individual names to the state. Each of the other states requires the LLC to disclose the owners to the state. This means if laws change, your information could be published without your consent or knowledge.
Other advantages in New Mexico include cheap filing fees and no annual reports, fees or taxes. Like Delaware, you would still need a third-party registered agent and organizer in New Mexico to keep total privacy. However, New Mexico requires you to file corporate income taxes. This is not necessarily a concern for LLCs with only one member, or ones who are pass-through entities, because the LLC doesn't pay any income tax as itself. A single member LLC is seen as a “disregarded entity,” which means their profits and losses are recorded on the individual IRS Form 1040 Schedule C. Other pass-through business entities should file a zero-tax tax form.
Wyoming might be your best option if your primary concern is keeping taxes low. There is no requirement for corporate income tax for an LLC in the state. Wyoming does require an annual fee for your annual report, which may be around $50 depending on assets you have in the state.
Along with Delaware and Wyoming, Nevada is considered an ideal state for incorporation thanks to a combination of favorable laws and other factors. Both Wyoming and Nevada allow the “nominee service,” which allows you to replace real owners named by nominees whose names appear in public records.
Reasons Delaware is Popular for Anonymous Companies
Delaware is said to have more corporations than actual residents. It's estimated that a majority of Fortune 500 companies are incorporated there. Reasons so many companies incorporate in the state are because of its “business-friendly” climate, the fact it has lower corporate tax versus other states, and it features a well-defined set of corporate laws. These factors, combined with the simplicity of setting up an anonymous company make Delaware an ideal place to establish a business that you don't want others to know about or show you are connected to.
There has been some change to this system in recent years, both at the state and federal level. Two laws were passed in Delaware in 2014 that mandate companies registered in the state name someone who knows the legal owners, however, the legal owners can still be another anonymous company. The information would have to be ascertained through a subpoena. There was no requirement that information is collected about the “real” owners. While there have been some changes in recent years, Delaware is hesitant to overhaul the system since anonymous companies make up a large portion of the state's income.
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