Anonymous LLC: What Are The Pros And Cons?

Summary

This video delves into the concept of anonymous LLCs, exploring their benefits and potential drawbacks. The presenter highlights the privacy and asset protection advantages, such as shielding personal information from creditors and preventing identity theft, which can be crucial for estate planning and avoiding unwanted solicitations. However, they also caution against using anonymity in situations where it's legally prohibited, when securing financing for real estate, or in active businesses where transparency is key for credibility. The video offers practical advice on navigating the complexities of LLC anonymity, emphasizing strategic use for asset holding rather than active operations.

Takeaways

• 🔒 Anonymity in LLCs provides privacy and protection from harassment, unwanted solicitations, and personal attacks.
• 🏛️ States are increasingly implementing laws similar to the Corporate Transparency Act to reveal the identities behind LLCs.
• 🛡️ Anonymity can offer asset protection by making it difficult for potential litigants to identify assets owned by the LLC.
• 🚫 Anonymity can complicate the process of securing loans for real estate purchases if the LLC is used as the borrower.
• 👥 Anonymity may be inappropriate for active businesses where transparency and trustworthiness are important.
• 📞 The speaker receives numerous calls and messages due to the assumption that he owns the entities he creates for clients.
• 💡 Anonymity can prevent identity theft by keeping personal details hidden from potential thieves.
• 🏡 An anonymous LLC can be beneficial for estate planning, allowing assets to pass quietly to beneficiaries without public disclosure.
• 📈 Anonymity can deter lawsuits if potential plaintiffs cannot find assets to go after.
• 📝 If anonymity is not allowed in a jurisdiction, setting up a holding company in a state that allows anonymity can be a workaround.
• 🔍 Anonymity can be a double-edged sword; while it offers benefits, it may also hinder business operations and lending processes.

Q & A

What is the main topic of the video?

The main topic of the video is discussing anonymous LLCs and whether or not one should use them in their business setup.

Why are some states trying to mirror laws off the Corporate Transparency Act?

Some states are trying to mirror laws off the Corporate Transparency Act to require owners to share their information with the Secretary of State, so they can identify who is behind the LLCs being created.

What are the main advantages of using an anonymous LLC according to the video?

The main advantages of using an anonymous LLC include privacy protection, asset protection, prevention of identity theft, and benefits for estate planning.

How can anonymity in an LLC protect against harassment or personal attacks?

Anonymity in an LLC can act as a smoke screen, preventing people from seeing who the actual owners are, thus protecting them from harassment, unwanted solicitations, or personal attacks.

What does the video suggest about asset protection through an anonymous LLC?

The video suggests that by setting up an LLC with anonymity, it hides the fact that you own it, which can deter potential litigants from suing or make them settle for insurance policy limits if they cannot discover your assets.

Why might anonymity be beneficial in the context of estate planning?

Anonymity can be beneficial in estate planning because when you pass away, your assets can quietly pass to your beneficiaries without others knowing, preventing potential claims against your estate from creditors or disgruntled heirs.

Under what circumstances should anonymity not be used according to the video?

Anonymity should not be used when the jurisdiction does not allow it, when buying real estate directly in the LLC with financing, when running an active business where transparency is important, and when the anonymity might complicate or delay the lending process.

What is a workaround suggested in the video for creating an anonymous LLC in a state that does not allow it?

The workaround suggested in the video is to set up a holding company in a state that allows anonymity, such as a Wyoming LLC, and then have this holding company manage the LLC in the state that does not allow anonymity.

How can anonymity complicate the process of securing a loan for an LLC?

Anonymity can complicate the lending process because lenders want to assess the risk associated with the actual owners of the LLC. If the LLC is anonymous, it can be more difficult for the lender to evaluate the financial standing and credibility of the owners, which may slow down or even jeopardize the loan approval.

What is the video's stance on using anonymity for active businesses?

The video suggests that anonymity should not be used for active businesses, especially when the owner's reputation is on the line. It is recommended to maintain transparency in such cases.

What types of assets are suitable for holding in an anonymous LLC according to the video?

According to the video, anonymity should be used for holding assets such as real estate, rental properties, savings accounts, or private lending activities where the owner's identity does not need to be disclosed.

Outlines

00:00

🔒 The Benefits of Anonymity in LLCs

This paragraph discusses the concept of anonymous LLCs and their advantages. The speaker emphasizes the importance of privacy and protection from harassment, unwanted solicitations, and personal attacks, particularly for those owning rental real estate or passive assets. Anonymity acts as a shield, preventing the public from knowing the business owner's identity, which can be beneficial in avoiding harassment and potential lawsuits. The paragraph also touches on the asset protection aspect of anonymous LLCs, where the ownership is hidden, making it difficult for potential litigants to target the owner's assets. Furthermore, it mentions the prevention of identity theft and the benefits for estate planning, where assets can pass to beneficiaries without becoming public knowledge.

05:02

🚫 Challenges and Considerations of Anonymity

The second paragraph delves into the challenges and situations where anonymity might not be advisable when setting up an LLC. It starts by addressing jurisdictional restrictions, such as in Washington state, where anonymity is not allowed, and suggests a workaround by using a Wyoming LLC as a holding company to maintain privacy. The paragraph also highlights issues with obtaining financing for real estate purchases when the LLC is anonymous, as lenders may require transparency of ownership to assess risk. Additionally, it points out that anonymity can be problematic when running an active business, as it may hinder credibility and trust with third parties and the public, who may question the intentions behind the lack of transparency.

10:04

🤔 Balancing Anonymity with Business Transparency

The final paragraph wraps up the discussion by advising on when to use and not to use anonymity in business structures. It suggests that transparency is key when you are the public face of an active business, as it builds trust and credibility. However, for holding assets like real estate or savings accounts, anonymity is recommended to protect personal information and maintain privacy. The speaker uses the example of their own firm to illustrate the importance of transparency in building a reputable business. The paragraph concludes with an invitation for viewers to engage with the content by leaving comments and questions, and to subscribe for updates on future videos.

Keywords

💡Anonymous LLCs

Anonymous LLCs refer to limited liability companies that are structured to conceal the identity of their owners from the public record. In the video, the concept of anonymous LLCs is central to the discussion on privacy and asset protection. The script mentions that anonymity in LLCs can be beneficial for protecting personal information from unwanted solicitations and potential legal threats.

💡Privacy Protections

Privacy protections are measures taken to safeguard an individual's personal information from being disclosed to the public. In the context of the video, privacy protections are one of the main advantages of setting up an anonymous LLC. The script explains that anonymity can protect business owners from harassment and unwanted attention, such as from disgruntled tenants.

💡Asset Protection

Asset protection involves strategies to safeguard one's assets from potential legal claims or creditors. The video script highlights how an anonymous LLC can serve as a shield to hide ownership and deter lawsuits, as potential litigants may not be able to identify the assets or business enterprises owned by the individual.

💡Corporate Transparency Act

The Corporate Transparency Act is a U.S. legislative proposal aimed at increasing the transparency of business ownership by requiring companies to disclose beneficial ownership information to the government. The script mentions that some states are mirroring laws off this act, which impacts the ability to maintain anonymity in LLCs.

💡Estate Planning

Estate planning is the process of organizing one's assets and affairs to ensure they are distributed according to the individual's wishes after their death. The video discusses how anonymity in an LLC can be beneficial for estate planning, as it can keep assets hidden from creditors and potential claims against the estate, allowing for a smoother transition of assets to beneficiaries.

💡Identity Theft

Identity theft is a crime where someone uses another person's personal information without their consent to commit fraud or other crimes. The script points out that by keeping personal details hidden through an anonymous LLC, the risk of identity theft is reduced, as potential thieves cannot easily access the information to take over the company.

💡Jurisdiction

Jurisdiction refers to the legal authority to govern or the geographic area within which a legal authority can be exercised. In the video, the concept of jurisdiction is important because it determines whether anonymity is allowed when setting up an LLC. The script gives an example where Washington state does not allow anonymous LLCs, necessitating a workaround.

💡Financing

Financing is the process of providing funds for a business or real estate venture, often involving loans or credit. The video script discusses the challenges of using an anonymous LLC when purchasing real estate with financing, as lenders may require transparency of the LLC's ownership to assess risk.

💡Active Businesses

Active businesses are companies engaged in regular commercial, industrial, or professional activities, as opposed to passive investments. The video differentiates between the use of anonymity for passive assets like real estate and active businesses, suggesting that transparency is preferable in the latter to establish credibility with the public and business partners.

💡Public Record

Public record refers to documents or pieces of information that are not considered confidential and are available for public inspection. The script explains that anonymity in an LLC can keep personal and business information off the public record, which can be beneficial for privacy and asset protection.

Highlights

The video discusses the use of anonymous LLCs in business setups and their advantages and disadvantages.

Anonymity in LLCs can provide privacy and protection from harassment or unwanted solicitations.

Anonymous LLCs can deter lawsuits by making it difficult for plaintiffs to identify assets or ownership.

Anonymity can protect against identity theft by keeping personal details hidden from the public.

Estate planning benefits from anonymity as it allows assets to pass quietly to beneficiaries.

Anonymity can be compromised if the jurisdiction does not allow for anonymous entities.

A workaround for jurisdictions without anonymity is to use a holding company from a state that allows anonymity.

Using an anonymous LLC can complicate the process of securing financing for real estate purchases.

Lenders may require more information when dealing with anonymous LLCs, which can delay closings.

In active businesses, anonymity can make third parties nervous and question credibility.

Transparency is recommended in active businesses where personal reputation is on the line.

Anonymity is best used for holding assets like real estate, savings accounts, or private lending.

The presenter shares personal experience with harassment due to lack of anonymity in business entities.

Anonymity can be crucial in protecting assets from creditors or legal claims posthumously.

Anonymity can prevent disgruntled heirs from making claims against an estate after the owner's death.

The video encourages viewers to subscribe for more informative content on business structures.

Transcripts

- Hey guys, in this video we're going to discuss anonymous LLCs

and whether or not you should use one in your setup.

Alright, let's get started.

Okay, so when it comes to anonymity,

you've heard me talk about this a lot on this channel

about the importance of setting up your structure

with anonymity.

Now the deal is is that

anonymity doesn't work great in all situations.

Now does have its positive benefits

and in fact it works so well,

there are a number of states now trying to mirror laws

off the Corporate Transparency Act

to get owners to actually have to share their information

with Secretary of State so they know

who's actually behind the LLCs that are being created.

Now, there's a lot of different reasons why they put forth

to collect this information.

Really it always comes down to the state wants to know

what your business is about

and they want to be all up into your business.

But that's a different video.

And this video, what I want to cover is

why would you set up an LLC with anonymity

versus when you would not want to use that.

So what are some of the main advantages

of using an anonymous limited liability company?

Well, first off, it's going to be privacy

protections because here's the deal.

When you have a business and it owns rental real estate

or you have any type of activity that owns a passive asset,

why do people need to know

that you have this business activity?

What benefit does it help them to realize

who the actual owner is of that particular company?

So what an entity can do when you set it up...

Or an LLC, that is when you set it up with anonymity,

it can basically you protect you from harassment

or unwanted solicitations

or personal attacks from, say disgruntled tenants.

You know, as someone who's been working in this industry

for 23 years, and I serve as the trustee of

many, many land trusts

that have been set up across this country,

I receive at a minimum of at least six to 10 phone calls

every single day

and that doesn't even count the text messages

because people assume that the entities that I've created

for my clients are actually my entities

and I own the property held inside of them.

So by having anonymity,

what you're doing is you're creating the smoke screen

so people can't see through the entity

to see who the actual owners are.

So you don't have to deal

with the same harassing phone calls

that I get every single day

because you have a shield there to protect you.

Now the other benefit of having an anonymous

limited liability company is going to be asset protection.

So what do I mean by that?

Well, by setting up your LLC with anonymity,

it hides the fact that you own it.

So if somebody was considering bringing a lawsuit

against you, they may think twice

because if they ran an asset search,

they're not going to see anything in your name,

they're not going to think that you're worth going after.

Or if they do proceed against you

and they can't discover that you held assets

or business enterprises, they most likely will settle

for the insurance.

That is whatever your policy limits are,

if that's the nature of the claim.

I've had several clients involved in this type of situation

before where they had banks after 'em,

they've had creditors coming after 'em,

and these third parties who are bringing

these types of claims, they can't find any assets.

So they end up going into a settlement discussion.

And my clients have walked away

only giving up the policy limits of their policy

and not any of their assets

because they were not discoverable.

So the third benefit that comes from having

an anonymous company of course is identity theft.

I mean, it's a real problem right now

and if people don't know your personal details,

they wouldn't be able to take over your company

and say it's their company

because they can't look through it

to find out who the actual owner is.

So I think that's a valid reason to set up an entity

with anonymity.

And then the last point about having anonymity

I think is important it has to do with estate planning.

So this is the thing is that when you pass away,

if you do leave creditors out there that...

After you've passed on,

do you want 'em to know what assets you have

or do you want some disgruntled heir

to realize what you're worth

and possibly bring in a state claim against your estate

just to create problems for your actual beneficiaries

'cause they think if they push hard enough,

that they can force them to give up some money

even though they're not entitled to it?

I mean, it happens all the time in this country.

So the thing about using anonymity in our planning is there

is an estate planning benefit that when you pass away,

no one's going to know that you own these assets

so they can quietly pass to your beneficiaries.

And this is also beneficial

if those same beneficiaries

who are receiving the assets are involved,

let's say in any type of litigation

or there's a creditor claim out there,

then it doesn't hit the public record.

So just how anonymity worked for you,

it's also going to work for your beneficiaries

because when they receive it,

that anonymity passes on to them.

So I think those are four compelling reasons

why you should set up a structure with anonymity.

Now you need to balance that against

what you're looking to do,

and that's why I say there's some bad parts

about using anonymity or when you should not use it.

Now number one, when would I not want to use anonymity?

Well, you can't because the jurisdiction

in which you're creating the entity, it does not allow it.

So for example,

if I was setting up a limited liability company

in Washington state,

I absolutely cannot create an LLC

in Washington state with anonymity.

So the state law prevents it.

However, there's a workaround if you watch my channel,

you know that workaround in creating anonymity

for a company in a state that doesn't recognize anonymity

is to basically set up your LLC,

let's say this is in Washington,

and make sure that when you're creating that LLC,

you've first established a Wyoming LLC.

So when you create this limited liability company,

you make this LLC member managed,

okay, by your Wyoming limited liability company.

So when I set up my Washington LLC right here,

I tell the state of Washington,

"hey, this company down here is the owner.

So if you want to...

When you ask me to disclose who the members are,

I'm going to disclose that it's a Wyoming LLC."

Now the thing about Wyoming, of course,

as you know, if you follow my channel,

and if you don't, you should start following,

I got lots of videos on this,

that this Wyoming LLC that you own and you control,

Wyoming does not collect any information

on its members or managers.

So as long as we keep pointing businesses

back to this blue box,

well, it's going to keep my personal information

off of public record.

So that's one area in which you wouldn't be using anonymity

is if you didn't have a holding company there,

well, you can't do it.

Now, a second reason why it can be a challenge

for people to use anonymity

might be if you plan to go out

and buy real estate directly in the LLC

and you're using financing.

Now this can be problematic for people

in the context that when the bank

looks at a limited liability company

that's going to take title to the property,

what the underwriter's going to be analyzing

with this LLC is they want to typically see you down here

as the member,

since you're the one that's going

to give a personal guarantee on that loan.

Because the thing about lending and with these...

With lenders and and LLCs and taking title of the property,

what they're doing is they're assessing

who the actual owners of the LLC are going to be

or who they are.

I mean, it's no different than if you own the property,

you're taking title directly in your own name.

They want to assess their risk in making that loan.

Meaning do any of the owners of this LLC

have any potential skeletons in their closet,

financial issues, tax issues, creditor issues

that may impair their ability to repay this loan

or impact this property?

So when you're using anonymity

and you're setting up this LLC

to take title to the property like this

and you've got your blue box down here

like we just showed you,

when the bank or the underwriter does their due diligence

on this red box,

again, let's use that Washington example,

they're going to look at the Washington LLC

and it's going to point them to a Wyoming LLC.

So this just makes the process

a little more complicated for them

and it can slow down your lending...

Or the loan in which again, push back your closing.

So if you have a deal that you want to close in an LLC,

you have a lender that's willing to loan to the LLC

and you know you have to close by a specific date,

maybe it's a 14 day close 'cause you got a great deal...

Negotiated yourself a great deal,

be careful in closing in an LLC with anonymity

because it may screw that loan up and force you

to get an extension.

If the seller refuses to do it,

well, then you've lost your earnest money

and of course you've lost that deal.

So here's what I tell people.

If you're going to use an anonymity structure

and you're closing on real estate in the name of the LLC,

first talk to the lender you tend to work with.

Make sure they understand what you're intending to do

and you know ahead of time what they need as far as

the entity is concerned, what they need to see

in order to close to get them all of the information

that's necessary.

Okay, and so another problem in using an anonymity structure

like this is when you're running an active business.

So let's say I've created a limited liability company here

and this active business, it's a contracting business.

All right, so I got my trucks here

and I want to go out there and I want to work with the public.

Now, when you're dealing with third parties,

many times what they're going to do is

figure out whether or not you're a credible person

to work with, right, if they're going to hire you.

So you might have people

that look at your company

and they're expecting to see you

as the owner of that company.

But if they look at that company

and they don't know who the owner is,

because you've set up a blue box here,

so this company that we've set up in Washington,

like contracting company points to a Wyoming LLC,

maybe that makes the parties

that you're looking to conduct business with

a little nervous that they look at that company and think,

all right, well is there anything

that they're trying to hide?

And so I think in an active business context,

when you're working with individuals,

you shouldn't use anonymity to hide the fact

that you're the owner, especially when you're holding

yourself out as being the CEO, the president,

the manager of that company,

you're the owner of the company

where it's your reputation on the line,

let there be transparency there.

So in those types of situations,

I think it works just fine.

Do not use anonymity, let there be transparency.

But when it comes to holding assets,

that's a whole different story.

And so that's where I think anonymity should be used

when we're holding on to real estate, rental real estate

or flipping property or savings account

or private lending, things like that.

Go all in.

Active businesses,

it does not make sense.

I mean, take Anderson for example.

You all know that my partner Toby and I created this firm,

but how would that look if you looked us up to see,

"hey, who's really behind Anderson,"

and we had a complete anonymity shield there

that you wouldn't be able to see who owns it.

Those are the types of things

you have to take into consideration

when you're building your business

and whether or not you want to use anonymity.

Hey, if you got a lot out of this video,

be sure to put some comments down below

what you think about it.

If you have any questions,

you know I get on, I answer those questions

on a weekly basis.

And if you know anybody out there

that is not yet a subscriber to my channel,

hey, send 'em a link.

Tell 'em to sign up

because each time I cut a video you're going to be notified

of my latest release.

Alright, take care.

(upbeat music)