There are good reasons why so many business owners prefer the asset and liability protection provided by an LLC or Limited Liability Company. However, some entrepreneurs require anonymity as part of their company formation. An anonymous LLC offers all the benefits of an ordinary LLC plus it’s totally anonymous.
Below we explain what an anonymous LLC is, how to set up one, the best states in which to set up one, the added benefits an LLC brings, and what to do if you can’t set up an anonymous LLC in your home state.
Information about a standard LLC is by default public
Every state in the US requires that you disclose certain information when you register an LLC. This typically includes:
– The names of the directors and officers of the business
– The manager of the LLC (only certain states)
– The registered agent, i.e. the entity or individual responsible for receiving essential notices such as legal services on behalf of the LLC.
Once you’ve filed your LLC’s initial documents, they are part of the public domain and they can be accessed by any interested party. If you would rather not have this information be available to the general public, one of the best ways to do this is by establishing an anonymous LLC.
What is an Anonymous LLC?
An Anonymous LLC is in many ways the same as a standard LLC. The major difference is that the owners can not be legally identified by the state. The most important decisions one has to make when setting up an Anonymous LLC is where and how you do it.
What are the benefits associated with an LLC?
We will first list the benefits shared by all LLCs. Below that we list some benefits that are unique to an Anonymous LLC.
– Limited liability
An LLC can help to protect the owners and/or members against personally being held liable for the activities of the company.
– Tax benefits
An LLC has tax benefits over a partnership or sole proprietorship because the IRS allows additional deductions. One example is that you can deduct expenses in respect of medical insurance. Your tax advisor will be able to explain all the other tax benefits of an LLC.
An LLC enables the business owner to take on partners at a variety of clearly defined levels. Apart from that, with an LLC you can also separate important business functions or assets. This provides an opportunity to alter ownership among these functions or assets. You are also allowed to merge or sell off functions or assets a lot easier than if all your firm’s business functions or assets were part of one big business unit.
– Helps to ensure business survival
Since an LLC can survive its owners, it will continue existing if you become incapacitated or you die. In fact, an LLC is one of only a handful of ways to cost-effectively make sure that your business will continue existing after you are no longer there. This is great news for your family or estate.
The following benefits are unique to an Anonymous LLC:
– Protecting your privacy
Registering an anonymous LLC enables the owner to protect his or her privacy by making sure their name, address, and other personal information will never become public property.
Registering an Anonymous LLC and then, for example, transferring all your property investments to that LLC can help to keep details about these properties as well as your financial status out of the public domain.
– Preventing frivolous lawsuits
With nearly 1.3 million lawyers, the highest number of any country in the world – and also one of the highest per capita figures, the United States is literally choking on the sheer volume of legal disputes. Not surprisingly the country is also brimming with professional plaintiffs who are forever trying to find ways to sue people or businesses for financial gain. Making sure your name and other details do not appear on the LLC’s ownership records can help to prevent frivolous litigation.
– Reducing chances of harassment
By keeping your identity and other personal information anonymous, you can virtually eliminate harassment from competitors, salespeople, or anybody else who develops a keen interest in you or your business affairs.
– Protecting your assets
Holding all your assets in an Anonymous LLC can help to shield them from your personal creditors and could also help to discourage lawsuits.
Which states are the best for creating an Anonymous LLC and why?
There is more than one way to create an anonymous LLC. Probably the easiest way to get it done quickly is to choose a state that allows anyone to create an LLC anonymously, i.e. without disclosing your identity or other personal information.
In this regard, four states stand out as being ideally suited to set up an Anonymous LLC.
- New Mexico
All four of these states allow one to register an LLC without disclosing private information such as your name on the registration documents. Depending on what your most important criteria are, one of them might be more suitable than the others. Below we list the most important benefits offered by three of them.
Delaware for paying less tax
This state is renowned for its business-friendly legislative environment. Apart from that, you also do not have to pay corporate income tax here. The only taxes you have to worry about is the $300 per year franchise tax.
New Mexico for protecting your privacy
Among all US states, this is the only one where it is possible to establish an LLC without disclosing the name of any of the members to the government. If privacy is your main concern, this is probably the best place to create your LLC.
Wyoming for the lowest costs AND taxes
Like Delaware, your Anonymous LLC will not have to pay a cent in tax if you establish it in Wyoming. On top of that, the annual fees here can be as low as $50.
Why is Delaware in particular so popular for establishing an Anonymous LLC?
The number of corporations in Delaware reportedly exceeds the number of actual residents. It is also believed that most of the Fortune 500 firms are incorporated in this state. The main reason why so many businesses prefer to get registered in Delaware is that it is more business-friendly than most other states. It also boasts the lowest corporate tax rates – and it has a clearly defined framework of corporate laws.
On top of that, Delaware also has an extremely simple set of requirements for those who want to establish an Anonymous LLC. No wonder it’s the go-to state when it comes to registering a business for which confidentiality and privacy are important requirements.
The system for establishing an Anonymous LLC has changed somewhat over the last few years, both at the federal and state level. In 2014 Delaware passed two laws that make it compulsory for companies that are registered here to name an individual who is familiar with the legal owners. These owners can, however, still comprise a second, anonymous, LLC.
Someone who wants access to that information will have to get a subpoena. The state still has no requirement that the ‘real’ owner’s information must be recorded. Despite these recent changes, Delaware remains reluctant to rock the boat since anonymous companies are responsible for a major part of the state’s income.
How to form an Anonymous LLC (example Delaware)
In what follows, we focus on the steps needed to establish an Anonymous LLC in Delaware. The procedure in Nevada, Wyoming, and New Mexico are very similar but there are some minor differences.
 Decide on a name for your Anonymous LLC
The naming of LLCs in this state is regulated by Delaware Code 18-102. This name has to be 100% distinguishable from any other active LLC name registered with the Delaware Department of State. The terms LLC, L.L.C., or Limited Liability Company must form part of the name. Finally, you can’t use any term in the name that implies it’s a different type of business.
The state permits registrants to reserve their preferred name for the LLC before actually registering it. This can either be done online or by sending an application for the reservation to the Delaware Division of Corporations.
 Appoint a Registered Agent
The role of such a registered agent is to be the initial recipient of all official notices and other communications sent to the Anonymous LLC. He or she then has to forward all of these to the LLC. It has to be noted though that there is no requirement for the Registered Agent to be located in Delaware.
 File the necessary documentation with the State of Delaware
The state of Delaware requires all registrants to send the LLC’s Certificate of Formation to it in printed format. A simple way to do this is by printing the form on the Department of State’s website, entering the necessary details, and then sending it to the Delaware Division of Corporation together with a filing memo.
Creating an LLC in another state
If you would like to establish an LLC but for some or other reason you do not want to do it in one of the four states mentioned above, don’t worry – although it might require a few extra steps, it can be done.
One option is to create an anonymous ‘holding company’ in Wyoming, New Mexico, Nevada, or Delaware. In case you are not familiar with the term holding company: it’s a business entity one creates to hold assets and own other businesses. As a general rule, holding companies do not independently carry out business operations; they merely generate profits from the investments and companies they own.
Once the anonymous holding company has been created, you will be able to establish an anonymous LLC in any other US state by – and here is the clever part – registering your anonymous holding company as the owner. For anyone who looks up the ownership of the LLC, all that will show up is the name of the holding company. Since that holding company is anonymous, it can not be traced back to you. For all practical purposes, therefore, your ownership interest in the LLC will not be in the public domain.
Can an Anonymous LLC enter into contracts?
The short answer is ‘yes’ it can. Yet, there are a few things to take into account:
- Where contracts are involved, the LLC’s legal name is normally used.
- When a contract is signed, the LLC’s designated representative has to provide a name (with appropriate identification), position within the LLC, and signature.
- It is possible to protect your privacy by entering ‘Member’ or ‘Authorized Representative’ in the ‘Name’ and ‘Title’ fields of the form and then just sign your name.
- If you have to enter your name on the form, make sure the contract has a confidentiality clause that protects your identity before signing it.
- The contract should also clearly mention the specific liquidated damages in case your personal identity is ever revealed.
- As far as commercial leases are concerned, the general rule is that the landlord will request personal guarantees for tenants that choose to remain anonymous.
- Before your Anonymous LLC enters into any contract with a landlord, make 100% sure it contains a confidentiality clause that holds responsible both the landlord and his agents, employees, representatives, contractors, and anyone else associated with the landlord who would normally enjoy access to confidential info and who could disclose it.
This article has discussed how to open an anonymous LLC as well as covered some of the reasons why they are useful. Registering an Anonymous LLC does not provide complete anonymity from the IRS (Internal Revenue Service) or the bank. Keep in mind your business will still have to pay state or federal taxes when and where they are due.