Indiana Business Law Blog
What is an Anonymous LLC?
An anonymous LLC (limited liability company) is a type of business structure in which the public has no access to the owners’ identities. This means that the names of the members (owners) and managers (if any) of the LLC are not listed on records that are available to the public.
Even though the members and managers are anonymous to the public, they are not anonymous to certain government agencies or to law enforcement. For example, the LLC’s tax returns filed with the IRS and other tax authorities list the names of its members. In addition, a new report that became mandatory this year for most LLCs, called a Business Ownership Information Report, discloses the names of most members and managers to the Financial Crimes Enforcement Network or FinCEN.
Benefits of an Anonymous LLC
Privacy Protection
One of the primary benefits of an anonymous LLC is the protection of the owners’ privacy. This can be particularly helpful for individuals who wish to keep their business interests confidential for personal or professional reasons. For example, a business that wishes to buy real estate to expand a production facility may be concerned that the price will be higher if the seller the business is in the market or that knowledge of the purchase might affect the business’s stock price. In that case, the business might use an anonymous LLC to make the purchase.
Asset Protection
Anonymous LLCs can offer a small measure of asset protection. By keeping the owners’ identities private, it becomes more difficult for potential litigants to target the individuals behind the LLC in lawsuits or other legal actions. Deep pockets may attract lawsuits of little or no merit. However, this benefit is often marginal. An anonymous LLC does not offer much more true asset protection or a stronger liability shield than any other.
Reduced Harassment
There are numerous reasons that business owners might be harassed, and an anonymous LLC can make it more difficult for the harassers to find the owners. Lottery winners sometimes use anonymous LLCs, sometimes in conjunction with a trust, to reduce the number of people who want to sell them all sorts of questionable investment schemes.
Enhanced Business Reputation
For some businesses, anonymity can enhance their reputation by focusing attention on the brand rather than the individuals behind it. This can help in creating a professional image and building trust with clients and customers.
Drawbacks of an Anonymous LLC
Limited Availability
Not all states allow the formation of anonymous LLCs. You may need to organize your LLC in a state other than your home state, which can create a modest amount of inconvenience.
Complexity and Cost
Sometimes, an anonymous LLC can be more complex and costly than a standard LLC. Because owners of anonymous LLCs cannot serve as the LLC’s registered agent without revealing their names, they may need to engage the services of a registered agent or third-party service provider, which can incur added fees, but those fees are usually relatively modest.
Legal and Regulatory Scrutiny
Unfortunately, anonymous LLCs can make it easier for unscrupulous owners to get away with illegal activities. evasion, leading to potential investigations and compliance challenges. For that reason, Anonymous LLCs can attract scrutiny from regulators and law enforcement agencies. They are sometimes associated with activities such as money laundering or tax evasion. For that reason, anonymous LLCs can attract scrutiny from regulators and law enforcement agencies. Indeed, the purpose of the new Business Ownership Information Reports is to create more transparency to help government agencies, law enforcement organizations, and some types of financial organizations in ferreting out crime and fraud.
Challenges in Obtaining Financing
Anonymity can complicate the process of obtaining financing or investment. Lenders and investors typically require transparency about the business owners and may be hesitant to work with anonymous LLCs. Indeed, a business owner may have trouble opening a checking account or receiving check-writing from a bank authority if the public records do not list that person as a member or manager.
How to Form an Anonymous LLC
The process of organizing an anonymous LLC in Indiana is not much different than the process of organizing any other LLC except for information you leave out of the public filings and you will need someone else to do some of the things you might otherwise do for yourself.
Not all states allow anonymous LLCs. The states that are best known for allowing the organization of anonymous LLCs are Delaware, New Mexico, Nevada, and Wyoming. Fewer people are aware that Indiana also allows anonymous LLCs, and its low filing fees make it an attractive possibility. Here are the steps necessary to organize an anonymous LLC in Indiana.
1. Pick a name.
There are two general legal considerations for selecting the name of an LLC, any LLC.
First, you may not use a name that is currently being used by another LLC, corporation, or other entity that is required to file its organizational documents with the Indiana Secretary of State. For the most part, even minor differences are enough for a name to be considered unique. However, an LLC and a corporation that have the same name except for “LLC” and “Inc.” in their names are not unique. In addition, capitalization and punctuation cannot create a unique name. When you organize an LLC through the Indiana Secretary of State’s website, the first question you answer is the name of the company. The website automatically runs a check for uniqueness and will not allow you to proceed if the name is not unique.
Second are trademark concerns. You should avoid a name that would infringe on the trademark of others. For many LLCs, you also want a name that can create a good brand or strong trademark; that is irrelevant for many anonymous LLCs. In fact, for many anonymous LLCs, a nondescript name that doesn’t stand out and can’t be associated with its owners is a good choice. A common choice is three letters followed by “LLC.” The three letters could have some meaning to the owners, but using the initials of an owner, or the first letter of the last names of three owners, doesn’t further the goal of anonymity.
2. Obtain an address for the LLC.
Technically, you do not have to provide a mailing address when you organize an LLC in Indiana, and you probably do not want to do so for an anonymous LLC. However, using your own address or the address of a related business can destroy anonymity, even if it is not available from the Secretary of State. One choice is to rent a post office box from a U.S. Post Office. That is not likely the best choice because delivery services such as Federal Express or UPS cannot deliver packages to a post office box. They need a street address.
Another option that often works well is to obtain a virtual address from one of many companies that provide the service. The services provide a physical location where mail and packages can be delivered. Most will sign an acknowledgement of delivery on your behalf. Many services will forward mail to you or send you an email notice when something arrives so you don’t have to physically check the box regularly. To obtain a virtual address, you must complete USPS Form 1583, including your name and a copy of two forms of identification. Under current law, Form 1583 is not public information and cannot be reached through a Freedom of Information Act request.
3. Hire a registered agent.
Every LLC organized in Indiana must have a registered agent that has an address where legal papers can be personally delivered during business hours. The LLC must also have a registered agent in every state in which the LLC is registered to do business. The registered agent’s name and address are publicly available on the Secretary of State’s website.
Although the owners of LLCs can serve as the company’s registered agent, that would defeat the purpose of an anonymous LLC. The alternative is to hire someone to serve as your LLC’s registered agent to accept legal papers on the LLCs behalf and forward them to you. There are many companies that provide that service, and, like many lawyers, our firm often serves as registered agent for our clients. You must provide the name and address of a person who is authorized to receive legal papers on behalf of the LLC. Having a lawyer serve as the registered agent may provide a bit more protection against discovery of that person’s identity.
4. File the LLCs articles of organization with the Indiana Secretary of State through inbiz.in.gov. because the name of the person who files the articles is public information, you will want to have a third-party registered agent or, even better, an attorney file the articles for you. Note that even though the Indiana Secretary of State’s website asks for the LLCs address, the names of the members or managers, and whether the LLC has only one member, those questions need not be answered. Even though you need not disclose their names, you must disclose whether the LLC is managed by managers. It may be a little more difficult to pierce the anonymity of a member-managed LLC, particularly if the managers are not the members.
5. Write an operating agreement between the LLC, the members, and the managers (if any). Ideally, the operating agreement should be written and signed before the articles of organization are filed, but that is not a legal requirement. In fact, there is no legal requirement for a written operating agreement at all, but we strongly advise every LLC, including single-member LLCs, to have one. The operating agreement need not be publicly disclosed.
6. Obtain an employer identification number.
Most likely, your LLC will need an employer identification number or EIN from the Internal Revenue Service. Even if the LLC has no employees, it will need one to open a bank account. To obtain an EIN, you will need to disclose the name and social security number of a “responsible party,” who is the person who controls, manages, or directs the LLC — usually a member or manager. That information is not available to the public.
7. File Business Ownership Information Report (BOIR), if applicable.
The BOIR must include the names of most or all the members and managers, but that information is available only to law enforcement, to certain government agencies, and to financial institutions that conduct due diligence to ensure the security of the information. LLCs organized in 2024 must file the BOIR within 90 days after the articles of organization are filed. LLCs organized in 2025 or later must file them within 30 days after the articles are filed.
8. Ensure compliance with ongoing requirements, including a biannual Business Entity Report that must be filed with the Indiana Secretary of State every other year in the same month in which the articles are filed. In other words, an LLC organized in December 2024 must file a business entity report in December of every even-numbered year. The LLC must also file similar reports in most states in which it is registered to do business, and the BOIR must be updated whenever any of the reported information changes.
How NOT to use an anonymous LLC
This should go without saying, but we’ll say it anyway. Anonymous LLCs should never be used for illegal purposes. Using an anonymous LLC for fraudulent purposes is perhaps the surest way for a court to permit a plaintiff to pierce the LLC’s veil to hold its owners liable for the LLCs obligations. Our firm will not organize or support an anonymous LLC if we believe it is being used for criminal, fraudulent, or other unscrupulous purposes.
Conclusion
Anonymous LLCs offer significant benefits in terms of privacy and asset protection, but they also come with potential drawbacks such as increased inconvenience and regulatory scrutiny. Business owners considering this structure should carefully weigh the pros and cons and seek professional advice to ensure it aligns with their goals and legal requirements.
If you have further questions about forming an anonymous LLC, need a registered agent in Indiana, or need legal help with other business needs, please contact Harshman Ponist Smith & Rayl, LLC. Our experienced attorneys are here to help you navigate the complexities of business law and ensure your interests are protected.