LLCs As A Privacy Curtain

Posted 12 Aug 2009

A large part of  a magician's trickery is to distract and draw attention away from what is actually happening to make a rabbit or a coin vanish.  A part of vanishing yourself is to draw attention of unauthorized persons away from the true owner of assets and other private information. 

Although the link between you and your privacy may eventually be made by a persistent Pinkerton, the extra level of work will deter many from pursuing further. One way to do this is to do business and hold assets under the name of an LLC.

What is an LLC?

An LLC, a limited liability company, is a now common business entity like a corporation or partnership. It allows its owners to own assets and conduct business under the name of the LLC rather than the name of the individual.

The requirements to form an LLC vary by the state of the LLC and there are often some costs to setting up and maintaining an LLC. Each state will also have different formalities required to maintain the status of a separate legal entity while using the LLC.

You will need to consult with your attorney upon formation of an LLC to make sure that all of the financial and other obligations are properly complied with, depending on the state of LLC business. The advantages in privacy and even legal protection may greatly outweigh the costs and is one of the reasons why the LLC form of business has become so popular in recent years.

How is an LLC Beneficial

If the car you drive is in the name of your LLC, you have the prestige of driving a company car.  Your friends will think you are a high roller and very important in your company, which you are.  However, there are more practical and important benefits.

One of the more obvious ways that an LLC protects privacy is that when purchasing an asset, such as a car, or conducting other activities, the personal information of the individual is under less scrutiny than the LLC information. Business privacy and company privacy are far less at risk than personal privacy and personal financial privacy.

Business privacy and company privacy is important to protect against corporate espoinage, something hardly likely to occur unless the business owns a trade secret worth stealing. 

Thus, the fewer times that your personal information are entered into some database somewhere, the more control over that information you have and thus can avoid information leakage. There may even be some direct benefit in avoiding legal proceedings in some states where you have an LLC. An LLC should never be used to avoid a responsibility or to to perpetrate fraud.

Helpful Hint

There is one suggestion to improve both privacy and limit unnecessary exposure to liability.  I, along with many, would recommend that you do not put all of your major assets into one LLC business if possible.

This is because if the LLC becomes liable for some amount of money, all of the assets of the LLC are the first to be subject to satisfaction of that obligation. Thus, if all of your major assets are in one LLC, your major assets may be used to satisfy an obligation of that LLC.

In contrast, if only one major asset is in each LLC, then your major assets in separate, properly operating LLCs will not be used to satisfy liabilities that arise under another LLC business.  There is a phrase relating to eggs and baskets that some may be thinking of, but since Easter is a long way off, I will refrain.

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The legal system provides many ways to protect individuals from the invasions of personal privacy and personal liability. The LLC is one of those ways. Some may not realize that they could benefit if they form an LLC to help add an extra level of privacy and security to their lives. 

Depending on the state of LLC, the advantages may be significant.  You will need to find an attorney to help you form an LLC.