Springfield Business Journal Articles

Sarah Delano Pavlik

Keeping Information Private

Q:    How can I keep information about myself and my company private?

A:    First, don't try to hide income or assets from the government, creditors, or your ex.  You can end up owing much more and/or spend time in jail.

    There are legitimate reasons for wanting to keep your information private, however, the combination of the internet and increasing government regulation makes this more and more difficult.

    Let's start with real property ownership.  It was always possible for someone to go to the county building and review real property records, but now anyone can do so from his/her couch for property in many counties, including Sangamon.  A user can enter a name and find out what that person owns or enter an address and find out who owns the property.  If you don't want people to know you own the property, what are your options?

    You can use a trust.  Land trusts are used commonly, but any trust will do.  A trust can have virtually any name, such as "The 123 Trust," meaning that the name will not reveal who you are.  It is also important that you not serve as trustee of the trust.  A deed transferring property to the trust will name the trustee, such as "XYZ Bank, Trustee of Trust 123."

    You can also use a business entity, such as a limited liability company.  An LLC can also have virtually any name, but it must not be substantially the same as the name of an existing LLC or corporation registered with the state of Illinois.  A review of the Illinois Secretary of State website shows 123 Corp., 123 Inc., and 123 L.L.C. have been used, so you will have to come up with something else.  If you use an LLC, you cannot serve as a manager of the LLC because all managers are listed on the Secretary of State website.  If you use a corporation, you cannot serve as an officer, as the names of the officers are listed on the Secretary of State website.  You will also need a "neutral" registered agent listed for the LLC or the corporation.

    Some states, including Nevada, New Mexico, and Wyoming don't disclose ownership information of LLCs.  However, if your New Mexico LLC wishes to do business in Illinois, it will have to register with the Illinois Secretary of State and reveal who its managers are.

    So, if you are willing to use someone else as trustee of a trust, as manager and registered agent of an LLC, or as officers and agent of a corporation, you could make your identity difficult to find.

    Using third parties will not keep your ownership a secret from the federal government.  The Corporate Transparency Act (part of the National Defense Authorization Act for Fiscal Year 2021) became law on January 1, 2021.  This act requires corporations, LLCs and “other similar entities” formed within any state to disclose certain information regarding their beneficial owners (that is, someone with ownership rights to property although the title is in another name) to the U.S. Treasury.  The Act will become effective on the date that the Treasury issues regulations, which can be no later than December 31, 2021.

    Bank and brokerage firms are already been bound by strict "know your customer" laws designed to reduce money laundering.  Financial institutions are required to "verify the identity of each beneficial owner of a legal entity customer," i.e., members of an LLC, beneficiaries of a trust, etc.  They must verify the names of the beneficial owners, their addresses, dates of birth, and tax identification numbers.

    Under the Bank Secrecy Act (BSA), financial institutions are required to assist U.S. government agencies in detecting and preventing money laundering, by keeping records of cash purchases of negotiable instruments, filing reports of cash transactions exceeding $10,000, and reporting suspicious activity that might signal criminal activity such as money laundering or tax evasion.  If a bank files a suspicious activity report (SAR) regarding your transaction(s), it is prohibited from telling you that it is doing so.

    The U.S. government has also used its power and influence to pressure most legitimate foreign financial institutions to disclose information about their customers, making the legendary Swiss bank account much less useful than before.

    In short, it is much more difficult to hide ownership now, however, you can at least make it more difficult than a simple internet search.

This article is for informational and educational purposes only and does not constitute legal advice.

 

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