(Newswire.net — July 7, 2022) –John D. Rockefeller, the greatest titan of American enterprise, once said, “The secret to success is to own nothing, control everything”. This manta of asset protection still holds true today. One vehicle for achieving this is an anonymous company.
What is an Anonymous Company
An anonymous company is basically one whose shareholders and directors are not known. Although this level of anonymity is typically associated with secrecy jurisdictions such as exotic destinations like the Caribbean, or more mundane locations such as Delaware. However, anonymity can also be achieved in other states and countries.
In order to create an anonymous company, you “simply” have to list another company as the owner, thereby shielding the identities of underlying shareholders and directors. Another way to do it is to have someone else, known as a “nominee”, as the nominee shareholder or nominee director. This entails a degree of trust. You would of course have an agreement with that person. There are companies that offer “nominee services” to clients to provide just this anonymity.
What is a Secrecy Jurisdiction?
A secrecy jurisdiction has laws that protect the identities of shareholders and directors, with the most secretive not publishing any information about a company’s shareholders and directors. Tax havens are so not simply because of favorable taxes, but because of this identity protection. This is what has made places like the Bahamas, the British Virgin Islands, Liechtenstein, Panama, and even the United States itself, so popular. It might surprise people to think of the United States as a secrecy jurisdiction, but it is: federal and state governments do not share information with other governments. In fact, as early as 2011, the World Bank noted that the United States was responsible for more anonymous companies than the other 41 tax havens in the world combined.
Even where shareholders and directors are known, these may simply be nominees, and not the beneficial owners of a company. In the United States and other secrecy jurisdictions, beneficial owners are not made public, unless for instance they are part of a legal proceeding where their assets have to be made known.
Anonymous Companies Should Not Be USed for Illicit Purposes
You have to be aware that we are living in an era of transparency, so some information will leak out. So, for instance, there are automatic information exchanges between federal and state agencies such as CRS, FACTA, and FBAR. U.S. citizens are required to report any beneficial ownership they have, even if it is outside the United States. So you should not think of anonymous companies as ways to cheat the taxman. Revelations such as the Panama Papers also show that if you are trying to hide illicit gains, someone will release that information. Finally, the United States has managed to put enough pressure on offshore tax havens that their very existence has been called into question. Information exchange between governments, particularly within the OECD countries and the European Union, is increasingly common.
What is Beneficial Ownership?
A beneficial owner is the ultimate owner of an asset. So, for instance, when FACTA asks you to report your beneficial ownership, they are not asking you to name those assets in which you are an explicit owner, they also want to know about those assets in which your name is behind a nominee owner. The question is no longer just about what your name is on, but where you benefit. In fact, many people have started to redefine assets not simply as what you own but also as what you control, and that gets to the heart of the matter.
The nature of beneficial ownership means that it is about individuals, not other companies. You can’t point to another company and say that’s the beneficial owner, you have to speak about human beings.
Are There Any Global Standards on Beneficial Ownership?
It has to be said that though there are standards on beneficial ownership, they are still weak. For instance, a company may be obliged to know who its beneficial owners are, but it is often not required to report this.
However, if you take the example of the sanctions on Russian oligarchs, the United States and its allies have been very successful in freezing assets because of existing information exchanges. So the more apt thing to say is that anonymous companies are a great tool for protecting your privacy, but you should not think that they can be used to protect you if you want to commit a crime. However, as the OECD itself notes, determining beneficial ownership is a very difficult task.
What to Consider When Opening an Anonymous Company
As we have been at pains to stress, the one entity you should assume will eventually find out what you own, is the government. Outside of that, an anonymous company can provide very real identity protection.
However, you have to consider the operational aspects of using an anonymous company. As the Nomad Capitalist notes, the more structures you need to run a business or own assets, the more costs you will have to incur. You will have to hire someone to oversee all of this, and the bigger your fortune, the greater the costs. So you have to have a very good calculus of costs, to see if the numbers add up.
The structures you use will need to be renewed on an annual basis, the managers paid, and the machinery kept going.
In addition, many private banks shift clients to commercial divisions if those clients move their assets to a trust, for instance. This isn’t an iron law but it has to be considered.
The important thing is to understand the anonymous company so that you can see if it is right for you and how you can take advantage of its many benefits. You want to gradually add complexity to your own structures as you earn more money. Keep your structures simple and anonymous companies will work for you.
For more information on Delaware anonymous companies, click here.