Anonymous LLC States
Perhaps you have already made this mistake: you set up an LLC in some state, and all a creditor had to do was check the Secretary of State's website to find out that you were a member or manager of that LLC. Once a creditor discovers that you are a member or manager of an LLC, they know that you are conducting business and may assume that you have deep pockets.
Each year, more than 15 million civil cases are filed in the United States. Many of these cases are brought by people looking for a large recovery by filing a lawsuit against a business owner, investor, or someone they believe has assets.
Every investor or business owner has a target on his or her back. It is also easier than ever for someone to find personal information on the internet, including business interests and ownership of assets.
The Importance of Anonymity
Because of the issues outlined above, anonymity is a key part of asset protection. Anonymity means making sure no one knows what assets you own except those who need to know.
Staying anonymous can help protect you and reduce the risk of a lawsuit. But many investors and business owners fail to achieve anonymity because their attorneys do not know what they are doing, what their clients' goals should be, or where the true risks lie.
In a few states, including Nevada, Wyoming, Delaware, and New Mexico, it is relatively simple to protect assets with a business structure that does not require your name to appear on the initial public filing record.
In these states, one common way to achieve anonymity with regard to assets is by filing an anonymous LLC that then takes ownership of those assets.
What is an Anonymous LLC and How Does it Work?
Each state requires certain information to be disclosed when you form a business entity. This information generally includes, among other things, the names of the officers and directors of a corporation, the general partner of a partnership, or the manager of an LLC.
However, in some states, particularly Nevada, Wyoming, Delaware, and New Mexico, once formation documents are filed, there is no need to update the required information. This allows you to use a temporary owner, director, manager, or general partner called a nominee when forming the LLC.
The nominee's name and contact information show up on the public record. Immediately after formation, the nominee resigns so that you can assume control as the reappointed and undisclosed manager of the LLC.
The Benefits of Forming an Anonymous LLC
The ability to use a nominee during formation is the key to creating an anonymous LLC that can be used to cloak your ownership of certain assets, shielding them from creditors and reducing the visibility that can attract lawsuits.
It works as follows:
- You create an LLC in New Mexico, for example, using the name of a nominee manager.
- After the LLC is filed, the nominee manager resigns and you become the undisclosed manager of your company.
- Once this entity is set up, you can then create multiple member-managed LLCs in other states that all point back to your New Mexico LLC.
When you set up a member-managed LLC, you must normally list the owner. In this structure, the only owner of record will be your New Mexico LLC.
This way, when a plaintiff's lawyer runs a search to see what assets you have that can satisfy a lawsuit, they may not find assets in your name. This can make creditors more willing to accept a settlement or discourage them from filing the lawsuit in the first place.
An anonymous LLC can serve as a privacy layer for LLCs you create in other states. The structure starts with forming an LLC with a nominee manager in New Mexico or one of the other states where this is possible.
For More Information About Anonymous LLCs
If you want to create an LLC without putting your name across the public filing record, focus on the state where the entity is formed, what information that state makes public, and whether nominee manager filing is available.
For Texas owners, the practical question is often structure. Texas is not an anonymous LLC state, so privacy planning may involve an out-of-state anonymous LLC that owns or manages a Texas operating entity.