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Using a Holding Company for Privacy

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A holding company is a company whose primary function is to acquire and manage other companies. Holding companies are often used when a business owner wants to protect and individuate their assets from multiple business ventures.

In real estate, a holding company is also an excellent way to achieve privacy and anonymity in the business world. Some states require an owner’s personal information to be made public record. That means that anyone can look up your name, address, and phone number.

If you’d like to grow your property investments while maintaining your privacy, you have two options. You can create an out of state LLC in a state that allows you to maintain your privacy or form a holding company in an anonymous state that owns your public LLC.

What’s an Anonymous LLC?

An anonymous LLC (limited liability company) is a business entity that does not disclose the owner’s information in the state where the LLC is registered. Anonymous LLCs function exactly as regular LLCs while offering added protection to the owner’s privacy. The privacy is extended to all members of an anonymous LLC, not just the main owner or operator of the business.

Anonymous LLCs can protect owners from harassment that may be incurred as a result of the type of business being conducted. In real estate, an anonymous LLC can protect property investors from being harassed through the course of legal proceedings or from tenants who attempt to circumvent a property management company.

Anonymous LLCs also help owners buy and sell properties without disclosing their identities. This can be great for individuals who own multiple businesses and do not wish to disclose additional ventures.

How to Set Up a Double LLC

Once you’ve created an anonymous LLC in a state that protects the owner’s information, you’ll be able to take the next step and form a double LLC if you so choose. Through this process, you’ll be using your anonymous LLC as a holding company or parent company for the LLC in the state in which you want to buy and sell property.

You’ll start by forming an LLC in your state that lists the anonymous LLC as the owner. Contact your local Secretary of State and file the necessary paperwork. Some states do require that a manager’s signature be present on filing documents. In those cases, you can often have an attorney sign as a nominee to preserve your privacy.

Is Anonymity Ok?

Using an anonymous LLC or holding company to preserve your privacy is perfectly legal as long as you adhere to the required guidelines in place. Make sure you’re well-versed in legalities, including the various deadlines for additional filings, yearly filing fees, tax requirements, and associated business conduct guidelines.

Anonymity should never be synonymous with fraud when it comes to holding companies and real estate. If your intentions in establishing an anonymous LLC and double LLC are purely privacy-focused, then it follows that you will comply with any and all legal requirements. For those who do attempt to circumvent the checks and balances in place, rest assured there is legal precedent established to keep them accountable.

Using an Out of State LLC to Own Property

If you choose to refrain from establishing a double LLC, you’ll instead use your anonymous LLC to own all property you buy and sell in another state. While this option eliminates some of the complexities of adding an additional LLC to your business ventures, you will need to be informed regarding the actions your out of state LLC can and cannot take.

For example, most states allow out of state LLCs to own property. There are no complications in buying and selling properties as long as you adhere to real estate filings and tax laws. However, you’ll likely be unable to manage the properties you own with your out of state LLC. That’s when you’ll need to hire an existing property management company, especially if you plan to have rental properties with tenants.

If you’re opposed to using a property management company and want more control over your business, that’s when you should consider creating a double LLC in the state in which your properties exist.

Bottom Line

Whether you choose to use an out of state LLC to directly own property or create a double LLC, is fully up to you and your business needs. Just make sure you’re well-versed in all the appropriate laws and tax obligations for whatever option that’s right for you.