Can you set up an anonymous LLC in Texas?
Although Texas law does not permit anonymous LLCs to be formed within the State of Texas, you can protect your LLC’s privacy by setting up your LLC in a state that allows anonymous LLCs – Delaware, Wyoming, Nevada, or New Mexico – and then continue to do business in Texas.
How does that work?
Below, we will go over the basics of setting up an anonymous LLC in Texas, including:
- How do you set up an anonymous LLC,
- How do you keep your LLC anonymous, and
- Which states allow anonymous LLCs.
How Do You Set Up an Anonymous LLC?
If you want an anonymous LLC in Texas, your attorney can help you by associating counsel to set up your company in a state that permits anonymous LLCs.
Can you set up your company in a different state if you are doing business in Texas?
Absolutely – it is a common practice for companies to set up their LLCs or corporations in another state that is a better match for their privacy needs – or to save money on state tax requirements. Delaware, for example, is one of the most popular locations to incorporate because the State of Delaware offers benefits that other states do not so they can attract foreign corporations.
Which States Allow Anonymous LLCs?
Four states allow you to set up anonymous LLCs:
- New Mexico
Delaware is one of the most popular states because it offers benefits like:
- A Court of Chancery that is dedicated to business matters
- Additional personal liability protections
- No corporate income tax (although there is a $300/year franchise tax)
Unlike other states, Delaware does not require the disclosure of the identities of the officers, shareholders, members, or managers on your filing documents. You only need to identify a registered agent for the service of process and an organizer – roles that, if needed, can be filled by the business law firm that assists in setting up the LLC.
New Mexico also does not require business owners to disclose their identity, although, as with Delaware, you must identify a registered agent and organizer. New Mexico does tax corporations but offers the same privacy protections as Delaware.
Wyoming or Nevada are your other options for an anonymous LLC. Each state has its benefits that may be ideal depending on the circumstances of your business and what you are looking for. Both states require you to name an owner on your documentation, but you are permitted to “substitute” the real owner with a “nominee” whose name will appear in the public record instead of yours.
Why Would You Want an Anonymous LLC in Texas?
There are many reasons why business owners would want to remain anonymous.
- Setting up an anonymous LLC prevents bad actors from using your information to stalk or harass you
- If there is “bad press” or other negativity that arises from business operations, your identity is protected (although your identity may be disclosed to the court through a subpoena)
- An anonymous LLC has the same benefits as a normal LLC including tax advantages and limited liability protections
How Do You Keep Your LLC Anonymous?
No LLC can remain 100% anonymous in all situations. Some safeguards will help you to maintain your LLC’s privacy, but there are also situations where you may be forced to disclose your identity, including to banks, the IRS, or courts in response to a subpoena.
To open a bank account for your anonymous LLC, you must have a Federal Employer Identification Number (FEIN), which requires you to identify yourself due to federal regulations. If your bank obtains your identifying information, however, they should not disclose it to third parties unless they receive a subpoena from a court or government agency.
Contacts and Confidentiality Clauses
When you enter into contracts on behalf of the anonymous LLC, you will need to identify the legal name of the LLC, and, even if they do not require you to personally sign, most third parties are going to require your signature as an authorized representative of the LLC. In other cases, banks, landlords, or other entities may require you to personally guarantee the contract as well as the LLC.
In these situations, your attorney can ensure that a confidentiality clause is included in the contract’s provisions that will:
- Prohibit disclosure of your identity by the other party to the contractor and their employees, agents, or representatives
- Make the other party liable for any unauthorized disclosure
- Set an amount of liquidated damages in the event of a breach of the confidentiality agreement
Lawsuits and Subpoenas
The creation of an anonymous LLC does not protect your identity from banks, the IRS, or the courts if a lawsuit is filed.
Even if you are protected from liability by your LLC, you can be subpoenaed by the court, state agencies, or federal agencies. If your LLC is sued, the attorneys can require you to disclose your identity through a subpoena. Your registered agent or organizer may also be subpoenaed and compelled to testify about your identity.
In the case of a subpoena issued by the court or a government agency, your attorney can respond on your behalf, move to quash any subpoenas, seek a protective order, and assist you in maintaining your LLC’s anonymity to the extent possible.
Please feel free to contact one of our Murray Lobb attorneys to obtain our legal advice regarding setting up an anonymous LLC for your Texas business. We also remain available to help you with all your general business, corporate, and estate planning needs.