New Corporate Disclosure Requirements Make It Harder to Own a Business Anonymously

The Federal Government has new disclosure requirements that require corporations, LLCs and similar business organizations to disclose their true owners to the government. The disclosures are supposed to remain confidential (at least until the system is hacked), but still it makes it harder to own a company without anybody knowing you do.

This article at CEB has a great rundown of the effectiveness existing ways you might try to hide the identity of a business owner in California: https://research.ceb.com/posts/business-owner-anonymity-and-the-new-beneficial-ownership-reporting

Here's a summary:

Sole Proprietorships: Te owner's name is public or readily available by a search of local fictitious name and licensing records.

General Partnerships. The names of partners in a general partnership will not be of public record, except in certain cases, including if the GP has a fictitious business name.

Limited Partnerships. Names of general partners appear on the certificate of limited partnership filed with the Secretary of State under Corporations Code section 15902.01(a)(1)–(4), and are public record. Names of limited partners need not be public record.

Limited Liability Partnerships. The names of members of LLPs are public record.

Corporations (including S Corporations and Close Corporations). The names of corporate shareholders are not a matter of public record (except for public companies in some cases), but the names and addresses of officers and directors are public record.

Limited Liability Companies.

  • In a manager-managed LLC, the names of the members need not be a matter of public record, but the names and addresses of the managers must be listed in the Statement of Information filed with the Secretary of State under Corporations Code 17702.09.

  • If the LLC is managed by its membersthe names of all the members will be of public record because their names and addresses must be listed on the Statement of Information. 

The new Federal Disclosure Requirements come from The "Corporate Transparency Act"  - it requires corporations, LLCs, and similar business entities to identify and disclose to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) the entities’ "beneficial owners.”

Obviously, the term "beneficial owner" is tailor-made to drive more business to lawyers. And indeed you will need to consult a lawyer if you don't know if this applies to you. But I can at least tell you that if you own 100% of a business, you are a beneficial owner.

Entities in existence prior to the effective date of the implementing regulations will have two years to report their beneficial ownership information to FinCEN; entities formed after the effective date will have an immediate reporting obligation upon formation.

Contact us if you want to know more about the new requirements and whether they apply to you.

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