PRIVACY COMPANIES & LLC’S

Baseless lawsuits seem to proliferate the legal landscape. In today’s increasingly connected world, plaintiff’s attorneys can find assets with just the click of a button. Privacy companies add a layer of protection around all that you have built. A plaintiff’s attorney would have to work very hard to discover your business entities and any assets they hold.

Certain states allow you to create entities that provide privacy. For example, Nevada, Wyoming and Delaware keep entity ownership private and do not publicly disclose the identities of company shareholders or LLC members. Wyoming and Delaware take it a step further and do not disclose corporate directors or LLC managers. Instead, the public record reveals only the name of the resident agent. Nevada is one of the few states that consistently refuses to disclose information to the IRS. However, you will need to provide the IRS with the name and social security number of an individual who will be responsible for all the entity’s tax issues. Wyoming only shares information with the IRS when real property is involved. 

In most cases, a business is required to register in any state in which it conducts business. So, for example, if you have rental real estate in California, you will have to register your entity here in California. Since California requires public disclosure of the name of the company ownership or management, extra steps must be taken to protect privacy.  The key is to name another entity as the manager or director of the California entity.

Privacy Trusts have been used to hold companies, to give privacy to the company owners. The Privacy Trust uses a “title trustee” who signs on behalf of the LLC, rather than any of the active members. This allows the business owner to avoid having their name in the public record as LLC member or manager. 

Another option would be to form an entity in a state like Wyoming and name that entity as the manager of the California company. That way, the public record in California provides the name of the entity holding the real property and names only the Wyoming entity as the manager.