this area is super murky with legitimate use cases for shell companies. im wondering why this is an area that hasn't been solved by eager engineers. seem like there is a large gap to fill for people needing turnkey IBCs but one problem might be using offshore data centres.
I often see advertisements for incorporating offshore but there is no legitimate way to know which are authentic and which are just skimming on top of what you can do by yourself.
It's quite fascinating enough that I need to hire a CFO or someone specifically familiar with IBCs
Hiding one’s address is nice so one can avoid listing one’s address in the public record. And the services used to conceal one’s address are largely the same services that hide one’s name.
Also, Delaware corporations are very popular for many legitimate reasons even for businesses with no personnel in Delaware. But you still need an agent for service of process in Delaware.
I wish the states would allow designating the Secretary of State as the agent for service of process and paying a nominal fee for them to forward documents electronically. This would keep relevant information available to law enforcement and the courts, but it would avoid the need for paying mildly sketchy registered agents for their mildly sketchy services.
It’s not clear to me that there’s any sort of bright line between shell companies and any other sort of corporation, anyway.
A registered agent is, among other things, a services mailbox. And a “shell” company, whatever that is, isn’t necessarily offshore.
Many US companies, even very ordinary ones, incorporate in Delaware for various, mostly good, reasons. IIRC even YC strongly recommends this. Unless the company actually has an office in Delaware, it will use the services of a registered agent in Delaware to satisfy the requirements of Delaware. Then the company will register to do business in whatever state it’s in. Or it could break the law and not register.
The only funny business here is that, at least traditionally, there is no requirement to inform Delaware of the beneficial ownership structure of the company. This seems to be changing — the US is pushing back against companies with anonymous ownership.
The big question, to me at least, is why anyone expects bad actors to fill out fancy new forms correctly.
> Both seem counter to the notion of a republic and the accountability needed for private property.
Imagine that you own and run Acme Critical Publishing, which publishes exposés of crimes and ethical lapses of the sitting President. In speeches, he starts rambling about your company as an example of Horrible Very Bad People, and the next thing you know some supported of his casually looked up your home address online and now there are burning lower-case-t's on your lawn... I'd say the republic and accountability are both suffering in that scenario.
It's one of those "tools that can be used for for good or evil" things, and simply prohibiting the tool isn't necessarily the best way to maximize the good while minimizing the evil.
In your story, there are two failures; firstly, the President's failure to exhibit due care in the content of his speeches (an increased responsibility due to his lofty station), secondly, the lack of a police response to disperse ominous gatherings before they become violent.
Neither of these failures have anything to do with the anonymity of company directors. The President could know you personally, and still leak your address. Similarly, there could be a mob vandalising your property even if you didn't run Acme Critical Publishing, because that kind of thing happens in riots sometimes.
In some countries there is almost no anonymity on the public record, but this doesn't seem to negatively affect the level of violence in their societies compared to otherwise comparable locations. Therefore I would opine that 'enjoying safety' and 'enjoying privacy' are two very different and mostly orthogonal issues.
> firstly, the President's failure to exhibit due care in the content of his speeches (an increased responsibility due to his lofty station)
There is no such legal requirement, right? What's holding the president accountable?
> the lack of a police response to disperse ominous gatherings before they become violent.
It's really not possible for the police to do this. Regardless, GP's comment was about one or a small number of people showing up to cause trouble. In reality, the police can pretty much do nothing to prevent this. If they could, there really wouldn't be any robberies or murder.
> It's really not possible for the police to do this.
You try burning t's on the front lawns of politicians and see how quickly the police do exactly that. You seem to think it's a perfect crime and you could never be caught or held accountable. That's an insane view, but you're welcome to test it for yourself and see what happens. I think you might be surprised.
A lone person (or even a small group) could show up and cause trouble on anyone's property at any time. Why don't most people do it? Probably because police exist and there would be consequences. Should everyone have their addresses hidden from all people at all times? Why should a company have that protection and not you?
What makes them so special?
I think it's far better to understand that transparency is important to our democracy and our freedom and that means accepting a certain amount of risk sometimes. The fact that someone, somewhere, might one day find out where you live is a risk almost all of us face right now. There's no reason for a privileged class of people who want to influence our lives and government while also hiding themselves from the public and accountability.
> disperse ominous gatherings [...] a mob [...] riots
Hold up, I didn't say anything about a riot, let alone a physical gathering. Just the contents of a speech where your hypothetical publishing company has become fingered as a target. It could very well be a video on a campaign-blog.
> the level of violence in their societies
The analogy isn't about violence, it's about kinds of damage to you (and to the republic) when the privacy is pierced, and violence just happens to be the most illustratively-obvious form of that.
So, imagine if Trump exposed the contact info of people behind one of those groups showing anti-trump ads. His minions could use it as a signal to attack them.
Ok, so we only allow the government the privilege of knowing who owns what… then we worry about the government abusing this information for political gain?
Why is public knowledge of who owns what home required for accountability in a republic? A functioning government should have no problem enforcing whatever laws and codes exist regardless of whether the owner is directly known or shielded through some LLC.
Because our system of property, inherited from English common law, has a concept of a beneficial purchaser for value without notice. If someone gives you money for property and they are not on notice that there are conflicting claims, their claim is valid.
Such a system requires a way to establish constructive notice. A taker for value should have known that the land he was buying belonged to another if its ownership was properly recorded at the time of the purported sale.
Mileage may vary in different jurisdictions. Recording office May vary according to property type under state law; e.g., DMV might record motor vehicle titles while the county recorder in the county of the property probably records real estate.
So we should rely on the government being the only party with access to what you would make privileged information? A key aspect of public accountability is tautologically dependent on public information. We are supposed to keep our own elected officials as well as those granted the right to private property in check or else fraud and corruption would reign supreme.
We have been operating under these conditions since the advent of the democratic republic and to our good fortune.
No, it doesn't; but it turns out that you end up with a much poorer society without it. The king did not come up with incorporation merely to amuse the incorporators; it was to tax them and take loans from them, and that's because there was enormous economic activity they could undertake once there was a liability shield.
A monarchy is generally not governed by law. A monarch typically has ultimate authority to govern as they wish. Sometimes, their power is limited, and sometimes they delegate the responsibility of governance, but a monarch is precisely the opposite of a republic governed by law.
Or even non-public figure not wanting randos knowing where their house is.
I'm not a public figure and I don't want where I sleep posted all over the internet. I don't have the budget for security if some Twitter fool decides to give me a death threat because of a comment.
Back in the day, I looked up a minor celebrity in my hometown and just... knocked on his door one afternoon and had a nice chat. Can't wait to explain this to my grandchildren.
If someone really wants to know where you live, they will find you. If the information in your bio is actually yours, there’s already plenty to work with. :)
> A lock is not to keep out bad guys who want to get in
This is definitely not true. Locks are to keep randos from invading your space — drunk, drugged, and/or mentally unhealthy people end up in the oddest places sometimes. My buddy had a guy high on meth open and climb through a laundry room window and start wandering through his house. I’ve twice had drunk people knock on my door loudly and try to let themselves in (different cities) and swear that they were at the right address. These were all in decent/nice areas (some not so nice areas a mile or so away, but still…).
Same with privacy corps…
You don’t want some rando who is irrationally angry at your business or at you to be able to find you easily.
You don’t have to be as famous as Barbra Streisand in order to be a person of interest to mentally unhealthy randos.
I’ll do everything I can to keep sickos the hell away from me. Too many stalkers or people DMing inappropriate shit. But I never forget that in the end I’m never truly safe from someone trying to do serious harm.
USA is uniquely dysfunctional in only being able to (mostly) identify people by referring to an address. You could very well have public ownership records without revealing addresses.
It's not always nefarious. If I'm an investor, I might make an agreement with an LLC that I'll invest $1000 in their business, but I get 99% of their income and ownership control, or even 100%. There's no requirement that we register or publicly disclose our private agreement.
The real question is, what legitimate reason do you have to know who owns a particular thing or asset. If you see a car parked somewhere, do you have a legal right to know who owns it? What about a lemonade stand? What legitimate legal reason do you have to compel people to register their assets?
The government responsible for the jurisdiction in which your private agreement occurs should have a register of this information.
It doesn't need to be available to the public at large, but should be available to those responsible for the jurisdiction that could be affected by that agreement.
Re: Car parked somewhere. If it has a numberplate, then there's a government agency that can track it's ownership (pending whether it's been registered to a company that then has some opaque international ownership structure).
Re: Lemonade stand. Minimum level of asset value for registration?
But why does the government need this information, for everyone, and everything? Again, what is the legitimate reason? I understand tax liability, sure, but so long as someone is responsible for paying the taxes on a thing, why is it important who has control of the thing.
Because it is important to know who has control of the thing if they control the thing to park illegally, scam people, or dump toxic waste into the river. It does not need to be public, but the responsible party should be identifiable and accountable. To the extent that harm is minimal or can be efficiently mitigated if no responsible party can be identified, it is probably socially acceptable to sacrifice a little bit of accountability for convenience and reduced friction. But at scale it is ridiculous to allow the intentional and calculated ablation of responsibility against legitimate legal grievances.
Because of the power differential between an employee who's given the responsibility of X versus a director/owner who threatened to fire said employee if they don't do legally questionable / flat out illegal thing in regards to X.
99.99999% of the time it's OK. It's those instances when it's not OK that it becomes societally important to demonstrate consequences for illegality.
I think it'd become a problem that governments around the world would prioritise if every individual conducted their private affairs through a shell company structure. I said elsewhere that doing so is going to be a potential retirement project of mine.
LLC’s a privilege granted by the public. It’s a creation of the voters’ government. It absofuckinglutely should come with a right for us to know who’s benefiting from our permitting such an arrangement to exist.
To everything else that’s a government creation for public benefit, that carves out special shields from liability and can potentially survive far longer than an actual person? And that’s wholly optional?
Yes to those things I would probably apply the same logic. Not the different logic you suggest. The same logic.
Nobody’s making anyone ask the government to grant them an LLC if they want to risk some money.
But if you want the public to grant you special protections for you and your investments, and to form from the void, for you, an entity that can act on its owners’ behalf and enter contracts and survive beyond its creators et c et c, it totally seems reasonable that the public should know who’s benefiting from that. Like, that’s the least that ought to be asked in return.
I think if someone asks the government to create an immortal, legal quasi-person with special privileges for their private use, the public ought to get to know who’s benefiting from and controlling it. I think it’s proper that the public know who’s involved in those, yes.
Outside of privacy, I could imagine it might be beneficial to structure a set of companies as a primary company and a bunch of shell companies to separate accounting and legal matters. This way if a sub-company is in a dangerous industry or has large liabilities in its normal business that you would want the primary company to be insulated from that. IANAL so I don't know if this is a use case, there are probably ways to do this w/o privacy.
As an example, it’s extremely common for financial companies of all sorts to create a company to hold an asset or group of assets. This can be done for all manner of reasons, including difference in beneficial ownership.
A VC fund, PE fund, etc will often have a “manager” (the possibly big-name company that operates it) and a bunch of limited partners for that specific fund. If you own a piece of a BlackRock fund, for example, you don’t own BlackRock itself. And the corporate structure reflects this.
For clarity, in the instance I witnessed, the company being acquired was 100% aware that it was FAANG acquiring them, it's just that all the legal paperwork had the acquiree being consumed by a random shell company that was a wholly owned subsidiary of the FAANG company.
I think the goal is just not to leak information ahead of time, and perhaps to insulate the FAANG company in case anything goes sideways mid-deal.
Common case is privacy and safety for public figures. Some places have laws that specifically allow some public officials to have their otherwise public records sealed for privacy and safety reasons. Aggressive harrassment by activists, conspiracy theorists, and other malcontents is definitely a thing when you become high profile.
A related case is investors in or owners of a category of otherwise legal business whose relatives are targeted by nasty people for that fact alone. This includes businesses like coal and defense. Shell companies help shield themselves and their extended family from association with a business that attracts undue drama.
you dont need to use an intermediary to incorporate offshore
its the same process as incorporating in any US state, where you need an agent of service or registered agent if you dont live there
pick the country just like you would pick a state
and some countries have states too, the US is actually one of the weirder countries as you cant incorporate at the national level
whereas in st kitts & nevis - another federation - you can do both, a st kitts & nevis entity has one set of transparency and regulations, and nevis has a different set of regulations and generally seen as more favorable
its not really a taboo topic like ICIJ and some socioeconomic classes of people make it out to be. its a catalogue with offerings domestically and worldwide
The Corporation for Public Broadcasting might be a counter example to your “states-only” comment about corporate registration — except that congress incorporated it; it did not incorporate itself.
There are also federally chartered banks, although that’s not exactly the same thing.
(Now I’m starting to wonder why my BizOrgs casebook was so short…)
yes the only incorporation at the federal level is by Congress at the moment
even federal agencies register new entities with their states of choice
I’m always curious what a federal incorporation statute would look like, I bet it would suck as the loudest states’ representatives and delegates would want transparency
if the article was about Tor, comments would be overwhelming supportive of privacy. I have a hunch about why they would be against corporate privacy and it is probably tied to socioeconomic reasons and the media they are exposed to (aka reddit)
the bias probably does stem from that, tor is egalitarian everyone can use it, while people perceive business vehicles as expensive and advantageous only for the wealthy
The real question is - do the legitimate reasons outweigh the negatives? The stated reasons are pretty flimsy - are they worth not knowing who owns 1/4 of Manhattan?
There's all sorts of legitimate ways for instance there are traders who are watching companies doing mergers and acquisitions and you want to make it not so obvious. There's family offices that do not want to advertise but still need to manage their wealth. Holding companies with investment portfolios in non-liquid assets, isolate and manage risks etc.
People in the comments are conflating layering with simply legit use cases like using foreign jurisdiction and shell companies for corporate/investment strategies.
I understand why rich people want to keep secrets from the general public. I just don't think "rich people want it" is a justification for much of anything.
I'm fine with people having money. Commerce is pretty great. I just don't think having money should equate to political power. There's a reason the US fought a war to get rid of the English "nobility".
A common case that doesn’t seem illegal or immoral to me at least is people assembling groups of related properties in order to combine them.
So like if you want to buy all the buildings on a block, or something like that, and want to pay fair market value for all instead of being gouged for the last few.
I suppose that’s arguable either way on policy grounds but it seems reasonable to me.
I mean we are used to having at least some privacy when engaged in business negotiations. Do you forward your pay stubs from the prior job to a new employer when engaged in salary negotiations?
I often see advertisements for incorporating offshore but there is no legitimate way to know which are authentic and which are just skimming on top of what you can do by yourself.
It's quite fascinating enough that I need to hire a CFO or someone specifically familiar with IBCs