There are a number of different ways that individuals and companies who wish to operate with minimal disclosure and transparency can go about achieving their objective, however they may soon be deprived of a longtime favorite means. The House has passed, and the Senate is considering, legislation that would require limited liability companies to disclose their primary owners to the Treasury Department. The legislation is intended to cut down on the use of limited liability companies for money-laundering and other criminality.
Limited liability companies are used by real-estate investors and those who run one-person businesses as a means to protect the owners of the company from lawsuits. The new legislation would require companies with 20 employees or fewer and no physical office to provide information about owners who hold at least a 25% stake or who exercise substantial control of the company. The information would include names, birth dates, addresses and copies of government identification. The Congressional Budget Office has estimated that the rules, if enacted, would create a massive new dataset, which could include as many as 30 million beneficial-ownership filings annually.
Given that the filings would be made to the Treasury Department, which is not known for a propensity to publicly disclose information, it seems likely these filings would not be part of the public record. Nonetheless, the legislation has been opposed by National Federation of Independent Business, which has argued that the regulations pose privacy problems and an unnecessary burden on companies. It remains to be seen whether Congress will pass, and the President will sign, the new restrictions, but one thing seems certain – if LLCs no longer provide an effective way of hiding ownership interests, then those who wish to remain anonymous will find another way.