Do Anonymous LLCs Still Work in 2024?
Contents
- What is an Anonymous LLC?
- How is it different than a "Regular" LLC?
- The Corporate Transparency Act Killed the Anonymous LLC
- "What? But I've read all over about these anonymous LLCs?!"
- The Reality of Anonymous LLCs in 2024
- (Historical) Advantages and Disadvantages of an Anonymous LLC
- What About the Four States That Allow Anonymous LLCs?
- Delaware
- Nevada
- Wyoming
- New Mexico
- A Better Alternative to an Anonymous LLC?
- Frequently Asked Questions
He kept throwing all sorts of alternative structures out there to try and skirt the rules… none of which would work in practice.
Eventually, we did come to a solution that would give him most of what he wanted but that was still well within the rules.
But the discussion raised some interesting points worth sharing with you. This article is the result. Within it, you’ll learn:
The truth about Anonymous LLCs in today’s America.
The advantages and disadvantages of this structure.
What’s happening to the places that, until now, have offered Anonymous LLCs (specifically Nevada, Wyoming, Delaware, and New Mexico).
What people are really looking for when they shop for an Anonymous LLC… and how to get it.
What is an Anonymous LLC?
An Anonymous Limited Liability Company or Anonymous LLC for short, is a business entity where the names and contact information of the owners (aka members) are either kept private by law or not even known.
People often set them up as a way to try and preserve privacy. Because of the way the world works nowadays, it hasn’t really been truly anonymous for a while now, but that’s the goal.
How is it different than a "Regular" LLC?
There is no legal difference. Rather, it’s about the respect for privacy according to the rules and regulations in certain states. Some states have worked hard to be known as a private place to do business.
Others — like California, New York, or Massachusetts — are fiercely “anti-private” and very unattractive for people looking for discretion in their business dealings.
The Corporate Transparency Act Killed the Anonymous LLC
Until the beginning of 2024, there were four states that allowed you to officially keep your identity hidden from all records — Nevada, Wyoming, Delaware, and New Mexico.
However, thanks to the passing of the Corporate Transparency Act by the federal government, Anonymous LLCs are a thing of the past.
Administered by the Financial Crimes Enforcement Network (FinCEN), it’s estimated to affect at least 45 million LLCs in the US along with millions of corporations, limited partners, and other business entities.
It effectively creates a master register of the managers, directors, and officers of every small business in the country.
And if you own 25% or more of a qualifying entity, you must also report that ownership, also creating a master register of the beneficial owners of virtually every US-based small business.
Needless to say, this is a big change that has basically made it impossible to legally create an Anonymous LLC in this country.
"What? But I've read all over about these anonymous LLCs?!"
But despite the biggest change to corporate disclosure rules in 35 years, you’ll still find lots of websites with outdated or incorrect information out there.
For example, in preparation for this article, I looked at how our competitors approach the topic; they’ve had nearly eight months to update their materials, after all.
Most hadn’t bothered to update their pages. One had (the one who’s currently being sued in Arizona for allegedly defrauding a client) but only to update the published year; the information is still wrong.
Needless to say, this is a great disservice to their readers. They’re steering people in the wrong direction.
(If the facts are important to you, work with someone who puts the time and effort into keeping up to date with the latest developments. There are some good resources out there, but not always easy to find. That’s also something we offer through our Private Wealth planning service. You can book in here for a free no-obligation consultation with one of our Associates to learn more.)
The Reality of Anonymous LLCs in 2024
So if the Corporate Transparency Act killed Anonymous LLCs, is there a way to use privacy for asset protection?
That’s a bigger question and it requires us to look at the topic of risk.
When we build a client’s Action Plan, we look at (among many other things) two types of risk — private and public.
Private risk is the risk from things like lawsuits. Public risk is the risk from a government — civil forfeiture, regulatory issues, tax issues, eminent domain issues, passport seizure and so on.
Different clients have different risk profiles. We’ve had clients who’ve had to deal with public risk issues. But on strict numbers basis, lawsuit exposure is a much bigger daily threat.
The Corporate Transparency Act doesn’t offer much protection from public risk. But “Anonymous LLCs” — although not truly anonymous anymore — are still very useful against private risk.
Our recommendation:
It’s not possible to try and build an asset protection plan on privacy alone. Instead, you need to build a plan backed by laws that protect your assets and use privacy to make yourself less of a target in the first place.
(Historical) Advantages and Disadvantages of an Anonymous LLC
Until the implementation of the Corporate Transparency Act, anonymous LLCs claimed the following unique advantages:
They were anonymous: Your identity remained private, protecting you from prying eyes.
They offered strong asset protection: Specifically in two ways. First, LLCs have built-in asset protection if structured properly. Second, the privacy aspect made you less of a target in the first place.
They were easy to form: They were (and still are) very easy to set up, especially in states like Wyoming and New Mexico.
However, these were outweighed by some pretty big disadvantages:
They were next to impossible to bank: Banks won’t work with LLCs unless they know who the owners are. If they don’t, they won’t offer services.
They were more expensive than going on your own: Keeping an Anonymous LLC actually anonymous required you to use various services to fulfill certain minimum requirements without giving away your identity. These fees add up.
Issues in other states: Plenty of other states refuse to recognize your anonymity. This makes doing business across states more difficult.
Regulators don’t like them: That created the potential for more attention by the authorities than you want.
Perception problems: For people who don’t appreciate the power of privacy, anonymous entities could be viewed with suspicion when trying to do business.
For those reasons, although we like the idea of anonymous LLCs, they aren’t terribly practical. There are better structures to preserve your privacy. Contact us to see how this might apply to your specialized situation.
The Nestmann Group Ltd was actually incorporated in an Anonymous LLC state — Nevada. However, it wasn’t because of the anonymity. Rather, it’s because Nevada checked the boxes on other things important to us.
What About the Four States That Allow Anonymous LLCs?
Historically, four states offered Anonymous LLCs to varying degrees: Delaware, Nevada, Wyoming, and New Mexico. Here’s what has made them so popular for people seeking anonymity.
Delaware:
Minimal Disclosure: You don’t need to list the names or addresses of members or managers in public records. Only the registered agent’s information is required.
Annual Report Filings: You don’t need to file annual reports that disclose ownership or management details.
Registered Agents: LLCs can be formed by agents or through nominee services. This hides the true owners’ identities.
Strong Historical Support for Privacy: Delaware’s legal system has a long history of privacy when it comes to business.
Private Operating Agreements: LLC Operating Agreements are not filed with the state. This helps keep the ownership and management structure private.
Private Company Books and Records: Access to LLC books and records are available only to members or authorized representatives.
Private Control Details: Delaware LLCs can be manager-managed or member-managed. This further offers privacy to those in control.
Attorney-Client Privilege: Working with Delaware attorneys adds a layer of privacy thanks to attorney-client privilege.
Nevada:
Minimal Disclosure: You don’t need to list the names or addresses of members in public records. Only an “authorized signer’s” information is required.
Annual Requirements: You must file an annual list of managers or managing members, but the names of the owners (members) do not need to be disclosed in public records.
Formation Flexibility: LLCs can be formed by agents or through nominee services. This hides the true owners’ identities.
Strong Privacy Protections: Nevada’s legal system supports strong privacy protections for business entities.
Operating Agreements: LLC Operating Agreements are not filed with the state. This helps keep the ownership and management structure private.
Book and Record Access: Access to LLC books and records is available only to members or authorized representatives.
Management Flexibility: Nevada LLCs can be manager-managed or member-managed. This further offers privacy to those in control.
Attorney-Client Privilege: Working with Nevada attorneys adds a layer of privacy thanks to attorney-client privilege.
Wyoming:
Minimal Disclosure Requirements: You don’t need to list the names or addresses of members or managers in public records. Only the registered agent’s information is required.
Annual Reports Required: You need to file annual reports, but they do not require the disclosure of ownership details.
Formation by Agents or Nominees: LLCs can be formed by agents or through nominee services. This hides the true owners’ identities.
Strong Legal Privacy Protections: Wyoming’s legal system strongly supports privacy for business entities.
Non-Public Operating Agreements: LLC Operating Agreements are not filed with the state. This helps keep the ownership and management structure private.
Private Access to Books and Records: Access to LLC books and records is available only to members or authorized representatives.
Flexible Management Structures: Wyoming LLCs can be manager-managed or member-managed. This further offers privacy to those in control.
Attorney-Client Privilege: Working with Wyoming attorneys adds a layer of privacy thanks to attorney-client privilege.
New Mexico:
Minimal Disclosure Requirements: You don’t need to list the names or addresses of members or managers in public records. Only the registered agent’s information is required.
No Annual Reports: You don’t need to file annual reports that disclose ownership or management details.
Formation by Agents or Nominees: LLCs can be formed by agents or through nominee services. This hides the true owners’ identities.
Strong Legal Privacy Protections: New Mexico’s legal system supports strong privacy protections for business entities.
Non-Public Operating Agreements: LLC Operating Agreements are not filed with the state. This helps keep the ownership and management structure private.
Private Access to Books and Records: Access to LLC books and records is available only to members or authorized representatives.
Flexible Management Structures: New Mexico LLCs can be manager-managed or member-managed. This further offers privacy to those in control.
Attorney-Client Privilege: Working with New Mexico attorneys adds a layer of privacy thanks to attorney-client privilege.
A Better Alternative to an Anonymous LLC?
Now that Anonymous LLCs are a thing of the past, what’s the alternative?
That’s something that we’ve been helping clients with for decades now. And the first thing I need to say on that is: It needs to fit into the larger plan.
Good planning is about being clear on your goals, your risk exposure, and your unique situation.
Things like Anonymous LLCs are just a tool. Now that this tool doesn’t exist, we need to look at other tools that give us as many of the same benefits as possible. Here are some things to consider.
Trusts
Structured the right way, a trust can offer you a lot of asset protection and be very private in the process. In fact, a trust can be AS private as a classic anonymous LLC.
"Regular" LLC
Depending on your needs, a “regular” LLC in a privacy focused state might give you the best mix of privacy and asset protection. In addition to Wyoming, Nevada, New Mexico, and Delaware, there are other states that offer a good mix including Alaska and South Dakota. It really depends on your needs.
Frequently Asked Questions
What is an Anonymous LLC?
An Anonymous LLC is a type of Limited Liability Company that allows owners (aka members) to keep their identities private from the public and sometimes even from the state. This used to offer privacy.
However, it is no longer possible to form a truly Anonymous LLC in the US thanks to the new Corporate Transparency Act that came into effect on January 1, 2024. This new law now requires the disclosure of beneficial owners to state authorities, even if this information is not made public.
What states allow Anonymous LLCs?
Until recently, a number of states allowed Anonymous LLCs — Delaware, Nevada, Wyoming, and New Mexico were the most famous. However, that’s all changed since the Corporate Transparency Act came into effect at the beginning of 2024.
Now, no LLCs can be truly anonymous… at least to the government. However, it is still possible to protect your privacy in other ways. How you do that will depend on your unique situation.
As of now, no US states allow completely Anonymous LLCs without some level of owner disclosure.
I read that the Corporate Transparency Act has been challenged in court and might be overturned. Is that true?
The Act has indeed been challenged in court in various ways: an invasion of privacy, a fourth amendment violation (unreasonable searches and seizures), due process issues, and federal overreach on states’ right.
However, nothing has yet been decided and, as of this writing, the rules are still fully in effect.
How to set up an Anonymous LLC?
Forming a truly Anonymous LLC in the US is no longer possible due to the Corporate Transparency Act that came into effect early this year.
However, LLCs are still a very useful tool for both asset protection and are much more private than other structures (even if not strictly anonymous). You can enhance this privacy by using services like nominee directors, third party mailing and telephone services, and third party registered agents.
Is it still possible to set up an Anonymous LLC offshore?
There’s no legal way for Americans. The vast majority of overseas entities — including offshore LLCs — are subject to reporting to Uncle Sam. So although certain jurisdictions like Nevis and Belize offer extremely private structures, you still need to declare them in the US.
How you do this depends on how the entity is classified for tax purposes by the IRS. For instance, if it falls under the Controlled Foreign Corporation (CFC) rules, it must be disclosed as a CFC, among other requirements.
How can I avoid prohibited transactions in my self-directed IRA?
What’s the Best Way to Benefit from Anonymous LLC-type Structures?
A tool like an anonymous LLC, a “regular” LLC, or a trust, is only as good as the plan it fits into. If you’re wondering how to fit this strategy into your plan, consider booking a free, no-obligation call with one of our Associates to discuss further. You can do so here.
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