I see no comments so far about the Corporate Transparency Act[1] and how it affects privacy with LLCs, etc. The US government will soon have a database of all (complying) beneficial owners. This database will eventually be hacked, leaked, shared with local law enforcement (further allowing it to be leaked).
How will the "rich people" maintain privacy/secrecy after the Corporate Transparency Act?
[1] https://www.uschamber.com/co/start/strategy/small-business-c...
I think it's fascinating that when the topic is "shell companies" that the HN discourse is essentially "if they have nothing to hide then they don't need secrecy". I think that if the article were about linking "tor users" with their secret owners then we would see the opposite stance being taken.
I'm not taking a position here, and I'm not saying even that these stances are necessarily contradictory, but just that the blanket argument "X shouldn't get to be secret because I don't think they have a legitimate reason" doesn't differentiate between these two cases.
Companies aren’t people.
I'm people. I had a secret LLC I was doing contracting out of because I didn't want my companies'address out there easily. My companies' address being my house.
Privacy is a human right. An LLC is not a human - granting it privacy rights is a choice which a government may make for practical reasons, not a moral issue.
One of those practical reasons would be the use you put it to; that reason might be outweighed by widespread use of the same mechanism to shield wrongdoing.
Here we're talking about the privacy of the owner of the LLC, not of the LLC itself. In particular, the owner wants "what LLCs they own" to be private.
To be flip about it, I'd like a pony, too.
More seriously, merely because someone wants ownership of an LLC to be private doesn't mean it ought to be.
But that’s the op’s point. “Just because someone wants their browsing habits/pay amount/address/sexual preferences/etc private doesn’t mean it ought to be.”
Is just as meaningful a sentence and the contrast in tone on hn when it comes to one type of privacy technology (vpn/tor/etc) and another (shell companies) does seem more visceral than logical.
the constitution does not give you a right to a pony.
It does give you a right to privacy, defined broadly as "the right to be let alone". These include the Fourth Amendment right to be free of unwarranted search or seizure, the First Amendment right to free assembly, and the Fourteenth Amendment due process right
You can rent a mailbox or hire a registered agent for exactly this purpose for trivial amounts of money.
In California, Federal Post Office boxes were not renewed one year after a Federal election year.. "surprise" you need to re-apply for your box.. including details of your automobile registration ? home address of course.. It just so happens there are majority $RACE workers at this Post Office.. walking out of the office is an ordinary middle-class man who is also $RACE .. a quick conversation confirms that the Post Office worker had simply accepted the monthly payment from that man instead of a full review. Similarly-aged middle class man of not-$RACE gets the complete review? yes. true story in the US West Coast
So someone that isn’t your race went in to a post office make a monthly payment and wasn’t identified, and you went in to make a yearly contract renewal and they identified you using another piece of paper from the government?
Maybe the other man had already had his identity verified when he renewed, or was not doing what you think he was.
Maybe you are seeing a conspiracy where there isn’t one.
Maybe you could have used a bill or any piece of paper with your real address on it if you had asked what other pieces of paper would work.
Maybe I don’t for a minute believe that this is the full story.
Also, you can rent a private mailbox from any of the thousands of places that offer one if you so desire, and not deal with the post office.
Is the implication here that the feds didn’t already know who leased that post office box from them? And that they don’t have access to state DMV records?
What do you intend for me to infer from your assertion that one individual’s inferred race is more important to a postal worker than that specific individual’s identity or existing relationship with the post office in this case?
And where in the US do post office box rentals last longer than a year? I wasn’t aware that it was possible to lease one for more than 12 months at a go [0]
Are you familiar with Mail Covers? [1]
[0] https://www.usps.com/manage/po-boxes.htm
[1] https://www.uspsoig.gov/reports/audit-reports/postal-inspect...
When I set up my LLC I used all available ways to protect my name and address.
No reason really, but I guess growing up hearing my grandparents stories about the communist take-over of our country taught me what happens when you are a target because you are publicly linked to your wealth.
In the future, you can proxy the address via a registered agent.
Is it not an option to use one of those services that gives you a business address to use? e.g. you hear of hundreds of companies all registered to a single small office somewhere.
I also have an LLC for software and didn't love having to put my address, since I don't have a storefront or anything either, but I don't think it reveals any more info than someone could find from having your name in the first place.
I'm people. I had a secret LLC.
Your LLC is intangible. It can't do people-y things like shake my hand.
Intangible IP would be something else that isn't people - we're just less confused about that.
It differs from jurisdiction to jurisdiction, but in my one (NZ) you can use your lawyer or accountant as registered office address and address for service. So long as they hold a copy of the share register and other company documents should anyone wish to use their legal right to inspect your share register (it's an old clause, as share registers are also publicly available online now).
I think that if the article were about linking "tor users" with their secret owners then we would see the opposite stance being taken.
Companies aren't people.
Companies aren't people.
Umm, in many jurisdictions they are [almost]:
"In most countries, a corporation has the same rights as a natural person to hold property, enter into contracts, and to sue or be sued. Granting non-human entities personhood is a Western concept applied to corporations."
https://www.npr.org/2014/07/28/335288388/when-did-companies-...
https://www.purduegloballawschool.edu/blog/news/corporate-pe...
a corporation has the same rights as a natural person to hold property, enter into contracts, and to sue or be sued.
A person has rights other than to hold property, enter into contracts, and to sue or be sued.
A person has rights other than to hold property, enter into contracts, and to sue or be sued
Indeed.
In the context of this thread, how are those other rights relevant?
In the context of this thread, how are those other rights relevant?
That a company isn't a person. We know this because a person has rights a company doesn't.
That a company isn't a person. We know this because a person has rights a company doesn't
It would appear that this view is not widespread:
"In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for the term "legal person" is that some legal persons are not people: companies and corporations are "persons" legally speaking (they can legally do most of the things an ordinary person can do), but they are not people in a literal sense (human beings)."
IMO this is a red herring. A corporation's right to hold property, enter into contracts and to sue or be sued might be technically called "corporate personhood", but this is very different from what laypeople mean when they compare companies and people.
But their owners are.
Company = Tor client
Owner = Operator
but their owners don't share the same liability as the company. The entire reason the concept of companies exist is to create a separate entity that isn't a person.
To put it another way when a company breaks the law should its shareholders (aka owners) go to prison?
To put it another way when a company breaks the law should its shareholders (aka owners) go to prison?
The governing body of a corporation isn't its shareholders.
If you're asking what happens if a company breaks the law, then look up VW Dieselgate. Yes, some executives were prosecuted; yes, some of them went to jail.
I'm not sure what (company) shareholders have to do with this.
I'm not sure what (company) shareholders have to do with this.
The comment I replied to said this in reply to my original comment.
But their owners are.
Shareholders are the owners, not executives.
To put it another way when a company breaks the law should its shareholders (aka owners) go to prison?
Forfeiting dividends+penalty that were the product of illegal or negligent corporate practices seems like a reasonable start.
Stated more broadly: As far as investing in unethical and anti-consumer practices is a winner now - society would be better served if the opposite were true.
They aren't people in the same way that families aren't people, countries aren't people and football clubs aren't people.
I think privacy is really about power – we think the individual deserves privacy because it protects their personal autonomy from either corporate or state abuse. My view is that privacy is important because it's a prerequisite for self-expression – it's not just "oh you might have something to hide", it's that if you are watched/monitored then your behaviour will change.
Why is this different when it comes to corporations? First, some jurisdictions (e.g. the UK) argue that limited liability is a privilege because it provides extensive legal protection for those undertaking a venture. With that privilege come certain responsibilities and duties, one of which is non-anonymity. There's also a pragmatic argument that it deters bad behaviour which is another reason to justify this.
Second, I think it's _really_ hard to argue that being able to have an anonymous, offshore shell corporation is essential for your self expression. Especially not when you are using it to hide large amounts of money. In fact, this infringes upon other people's right to self expression by depriving the state of funding that it would use to provide services to them such as education, subsidising the arts, etc.
There's a good piece in the New Yorker which explores exactly this question: https://www.newyorker.com/magazine/2022/06/27/why-the-privac...
Friends of mine ran a small Ltd as a moonshine operation to fundraise for causes they wanted to fundraise for.
The way they do it has been tried all the way to the top here and everyone agree it is legal.
They still lost all their contracts, again[1], after media found out and made a fuzz about the fact that nobody took out salaries but transferred the profit to causes they identified with. Media even pointed out that it was legal, but, big orgs don't care: they do whatever it takes to get media away.
[1]: yes, this isn't the first time.
I really can't comment here because it seems like there are a million possible details that could make this either something very illegal or a miscarriage of justice.
It was in all the papers. Went through all instances, all the way to the relevant department.
But of course there is nothing in Norwegian law that that denies people the right to donate their share, as long as every other law is followed.
Which is why last time media even pointed it out in cleartext the article: everything is legal.
They just wrote the article in the style of a criminal investigation anyway and askes big companies questions the same way they would have done with if they were caught dealing with russian mobsters.
That way they can point to the fact that they have informed about it while still destroying the marked for someone they don't like.
(Sorry, English is nit my first language.)
If it’s a well known case feel free to share it, otherwise you’re just editorialising an unverifiable anecdote.
Sadly, as I have outlined in my reply to the other question (https://news.ycombinator.com/item?id=39926847) I am afraid of doxxing myself if I say more about this.
But, without me being a legal expert in any way, shape or form, my feeling is it is relatively similar to the "Fjordteam" case from Sandefjord a few years ago:
Different owners, different jobs, but operated by volunteers who looked for a nore efficient (and healthier :-) way to finance their activities instead of the traditional Norwegian "cake raffle" ("kakelotteri")
The case involving a large and well known religious organisation that “employed” an army of unpaid volunteers? Can’t see how that relates to the broad description you provided earlier.
It was a cooperative.
Used for fundraising.
Everything legal. As proven by taking it all the way up to the department.
Hyggelig om du forteller hvilken sak det faktisk er, siden jeg ikke kjenner den igjen fra beskrivelsen din.
Nice if you could tell which specific story this is, since I can't recognize it from your description.
(English below.) Desverre kan jeg ikke si det uten å doxxe meg selv.
Men ja, det dreiar seg om eit norsk AS som var oppretta berre for å subsidiere ei hjartesak.
Litt som Dinamo reklamebyrå som ble opprettet som en mer effektiv måte å skaffe penger til Stabæk (kjent fra "Ona Fyr"-boka som var innmari populær for noen år siden), bare i mindre skala.
(Orsak for blandinga av nynorsk og bokmål, det er berre eit ein måte å lage ein sjibollet så ingen tek meg for å vere ein utanlandsk påverkningsagent med Google Translate :-)
---
Sadly I cannot say more without doxxing myself.
But yes, it was a Norwegian AS (Ltd?) created for the sole purpose of financing something they cared about.
A bit like Dinamo, a Norwegian advertising agency that was created by fans of the Stabæk football club (and made famous by the much hyped book Ona Fyr a few years ago), just at a smaller scale.
(Sorry for my mix of Nynorsk and Bokmål above, it is mh attempt at creating a shibbolet so Norwegians don't take me for a foreigner with Google Translate :-)
non-anonymity. There's also a pragmatic argument that it deters bad behaviour which is another reason to justify this.
that goes both ways .. tax collection, arbitrary and capricious enforcement of regulation, scrutiny-as-punishment .. these things are as old as cities
I think this is usually a problem which is more easily solved by better funding tax authorities and installing better oversight rather than by making it easier for people to not pay tax.
I think most people's tax affairs are pretty clear-cut to assess (e.g. if you are an individual earning an income or run a small business). People who structure their tax affairs in convoluted ways where it becomes non-trivial to work out what the correct amount of tax they should be paying is (or even a question which can't really be answered until you are in caught) generally have a lot of money or are trying something stupid (e.g. trying to pay yourself your salary as a loan through an offshore company where the tax authority are obviously going to think this is illegal, see https://taxpolicy.org.uk/2024/01/18/barrowman_fraud).
The identity of public entities is a matter of public interest where the identity of private individuals is not?
For instance, who donated to NAACP during the civil rights era right?
I'm more interested in who donated to the George Wallace campaign.
And frankly, if revealing that sort of information to the public means less donations, I'm pretty fine with that as an outcome. The fact is, corporations can buy politicians/judges and that's a way bigger issue than the privacy of millionaires.
> The identity of public entities is a matter of public interest where the identity of private individuals is not?
For instance, who donated to NAACP during the civil rights era right?
Those individuals should not be a matter of public interest - yes. Was there a different point you are trying to make?
Some people say that about websites.
Sounds good in theory, but we all know a true public record of the stuff would be mined by scammers, law enforcement, recruiters and lawyers.
> The identity of public entities is a matter of public interest where the identity of private individuals is not?
Some people say that about websites.
The individuals visiting those sites would be reasonable candidates for privacy. What the websites do as a public entity would be subject to public scrutiny.
Yeah, my only use of this post was to see if there was anything I could get my business removed from in the tools listed. I just don’t like people knowing where I live; various past experiences have made me hypervigilant about this. It isn’t hard to track someone down with a state and sufficiently uncommon full name.
“As soon as you run a business or have more than $X you have no right to privacy” is a position a bizarre number of otherwise normal people have, though never stated in those terms.
I don't share the position you describe, but I don't think it's particularly bizarre in a capitalist society. When capital is very directly connected to the power you wield over everyone else, it's not unreasonable to wish to know the identity of the people that "control your fate." It's just the natural tension between the power of the people and the power of the wallet.
I have no clue how it is in the US, but can’t you simply set up a post office box to register your business?
Money isn't speech and corporations aren't people. I'm fine with someone using Tor to circumvent like a national content ban, I'm not fine with someone using a shell-corp to evade trust regulation or hide their involvement with a shady industry.
"X shouldn't get to be secret because I don't think they have a legitimate reason" doesn't differentiate between these two cases.
It does differentiate because what constitutes a 'legitimate reason' for having privacy is extremely different between the contexts. An individual human has much more latitude for seeking privacy than a chunk of capital given legal status by a contract, IMO.
Money isn't speech and corporations aren't people.
US case law has entered the chat.
companies don't have any right to privacy
why would someone need to know financial details of my consulting LLC? would you share your payment slip and related finances with us?
It's absolutely wild that you're equating the rights of a person to the rights of a corporation. Corporations impact all of us whereas a person using a VPN to remain anonymous is protecting themselves from corporations.
It's absolutely wild that you're equating the rights of a person to the rights of a corporation.
What about a one-person corporation?*
* I know that in some jurisdictions you need more than one, but let's not jump on that... Big business this isn't
Because corporate shell companies have political sway.
I'm happy to grant any corporation all the privacy they desire IF we had campaign finance and lobbying laws that prevented the corporations from interacting with politicians (At least, not without a significant barrier, IE, only being able to talk to a third party and getting criminal charges if they try and give them money).
The issue is money can buy sway. We saw this with Disney and copyright law becoming long and longer with more strict enforcement.
This I can agree with. Its a simple solution: An update to campaign finance law to US law that only entities with a US passport may donate to politicians.
This would need to also a law otherwise it would fail to pass the court system.
I don't think politicians would ever pass this law, which tells you exactly what you need to know. However, you could probably get referendum support for it.
Actually, maybe a law would not need to be passed. You could force a change in rules to require the US passport # for every donor to match the name of the donor itself. It would make corporations disappear from the rolls, similar to what happened when the IRS required the SSN of dependents in the 1040.
I don't necessarily think its the "nothing to hide" argument, even though it gets presented as that. Its more of frustration that privacy in the corporate world seems to have a lot more protections than the every day normal person world. The argument given for the average person is, "nothing to hide." Now it is just the normal person saying, well if that argument is sufficient for us, its sufficient for them. If it isn't, then the rules for us need to change.
In most locales, kinky sex parties between consenting adults are also perfectly legal - depending on details, of course.
In very, very few locations is it a good idea to let all but a small subset of people know you’re having them. Jealousy is an ugly thing.
Same with money.
To be fair, I don't think the rationale is really "if they have nothing to hide...". More something having to do with whether privacy is something that should come along with the legal arrangement of, say, an LLC.
just that the blanket argument "X shouldn't get to be secret because I don't think they have a legitimate reason" doesn't differentiate between these two cases.
Not only these cases -- that argument won't differentiate between any cases ;-).
Better I think to make sure we really understand the arguments being made. Good chance the real argument isn't quite _that_ bad.
Corporations have all sorts of special legal protections, on top of being the very thing (centers of capital) that the entire structure of government is meant to protect.
Individuals do not (unless backed by a corporation).
Reminds me of certain political persuasions who believe “corporations are people”.
Limited liability companies were created to allow risk-taking in business. They impose a social cost when they fail, but it's one we accept because the ability to have a crack at creating a business, without being personally bankrupted if it fails, creates more economic activity [0].
However, it doesn't mean we have to accept their usage for tax evasion or money laundering.
[0]: Caveats - depending on your jurisdiction, don't trade while insolvent, don't personally guarantee business loans or leases.
Similar to golergka's commentaary (currently) above, I don't think your comparisons are comparable.
Protecting yourself against the (ridiculously) surveilled internet is wildly different to going to the effort of hiding one's responsibility for, or ownership of, a company.
I'd argue there should be a line between openly public knowledge and knowledge available to agencies responsible for prosecuting corporate malfeasance, but the ability to completely hide from responsibility for corporate malfeasance should not be possible.
Intentional cherry-picking:
- I think the Sackler's are still doing "just fine"
- Sam Bankman-Fried should have spent more time speaking to lawyers in the Cayman Islands to upgrade his level of ownership 'protection' (although maybe the real owners did and SBF was a patsy).
These are great techniques and helpful advice, but note that they are basically of zero use whatsoever in the case of (for instance) a Delaware LLC.
The amount of information regarding beneficial ownership that’s out there varies by jurisdiction and entity type - and again, these tips are great ways to dig into those and quite likely come up with some interesting findings in a lot of cases - but in most cases a Delaware LLC is basically a black box.
I didn't know this until I searched for myself in the linked OpenCorporates site - was surprised to see my Delaware LLC not listed.
How/why is this true? IMO it should be straightforward to find the owner/director of a US based corporate entity.
Because the US, after bullying countries like Switzerland, Lichtenstein and Luxembourg to clean house, is now left as the single biggest western tax haven in the world.
Starting with the fairly tame observation that taxing commercial activity results in less of it; I'd imagine the country that is the biggest tax haven has significant commercial advantages. I'd imagine if we looked back at the height of the British Empire's commercial successes we'd find London was hoovering up commercial activity from all over the place.
And once a lot of finance is flowing through a country, I'd expect some sort of interplay with political influence to happen.
If you don't tax commercial activity and wealth, you end up taxing work. This kills societies.
You can tax land? A hard working person living a frugal life and who doesn’t buy real estate can avoid paying the vast majority of taxes in such a country, e.g. Singapore.
Such a person would be still paying that tax indirectly as it would be funded by any payments for the "land they use" e.g. housing rent would be directly influenced by that land tax, just as the prices of services (rent can often be ~30% of the base costs of urban service providers).
Not if tax is on land value (excluding value of buildings) The supply curve is usually vertical so price is fixed by demand.
I do not know whether this system exists anywhere, but it is possible.
A fellow Georgist. I see you are a man of culture and scholarship.
If you don't tax commercial activity and wealth, you end up taxing work. This kills societies.
In general this is true but if you are one of the few tax havens in the world then you have so much money going through that a very small percentage tax adds up to enough money to keep your citizens quiet. This only works locally though. Globally, other societies are getting screwed.
I mean, like it or hate it, I guess having the world’s most powerful military has its benefits.
Love it when the system works for you and you can shift assets away from any resposibility.
Hate it when you are the 6/7 (actually much more) of mankind on the other side of the gun.
Sorry, but i hate these shrug "but it has some benefits" reactions. Without a perceived moral high ground, your military is useless, ask putin, and your displayed lacking critical stance is the ever green substrate for that.
Sorry again. Whenever i see such pro/indiffernt US foreign policy posts, i see the next war coming and i feel urged to reply.
I’m pretty critical of contemporary US foreign policy along a number of axes: I don’t find there to be anything unpatriotic about acknowledging the shortcomings or decline of a set of institutions. Quite the contrary, reform is effectively impossible absent a recognition of a problem. I love my country, but it’s not in good health at the moment.
With that said, I think most everyone agrees that a chain of command exists, with its apex in duly constituted civilian authority, that authority substantially if not overwhelmingly mandated with the consent of the public.
We do this. We fall for the propaganda, we spend more time concerned with joining a small elite than throwing their worthless asses out in the cold. We vote for these people or fail to vote for others. We fail to speak up a little bit each and shift the entire burden on the few magnificent bastards who do take on city hall.
Anyone doing any “typical” amount of anything (including your humble commenter who is at or near the front of the queue on not doing enough relative to privilege) is at best not helping: the status quo is extremely bad and it exists because we lack either the clarity or courage to so much as boycott a big corporation, let alone an entrenched special interest, soft money capture ratchet.
The armed forces of the United States, with some exceptions notable enough to be scandals, are carrying out our collective agenda.
Let’s at least be honest about where the buck stops on this. I know I’ve failed in my civic and human duty to object effectively enough, often enough, and fearlessly enough. The least I can do is acknowledge that I among many stood by and watched while it all went to hell.
The armed forces of the United States, with some exceptions notable enough to be scandals, are carrying out our collective agenda.
I'd need some very good evidence before believing this for any country, not only the US. The people's interests haven't been in the equation for quite a while now. This phrase only works if you replace "our collective agenda" with "the agendas from the rich and powerful".
The typical counter-argument is that we indirectly choose our representatives, but that's a naive take at best. The only people with real power in a capitalist world are the ones with... a lot of capital.
If it's any consolation, the US military isn't the military for the American people. It's a gun for hire for the biggest political donors. This is the case to such an extent that the military leaders are completely in the dark as to why decisions are made.
It is the worlds most powerful economy and not military that has its benefits. The US can dictate global rules because the cost of being shut out of the US economy is too large and not because the US would invade Switzerland if they don't play ball.
I am not sure how and why everyone is ignoring the elephant in the room here. These laws are being "forced" by different "international" organizations at pretty much every country (except partially China and countries like Iran and North Korea that don't give a damn). Many countries could make money accepting financial refugees. That's how Hong Kong and Singapore built their wealth city states (good governance was just a part of it).
Even if we are being moralistic and transparent; for some countries, being tax-free is their only competitive advantage. Instead we are now to assume that tax-free jurisdictions are evil and should be abolished. Might as well just restart colonialism; at least colonial countries got to be part of the big trade.
Tax havens is a race-to-the-bottom thing, just like not caring about emissions. Or using slaves, if you want a more extreme example.
If your country's only advantage is to steal tax money from other countries, or provide cheap energy by burning coal, or cheap labor by using slaves, then it's perfectly fine to isolate that country to force it to stop. We obviously shouldn't just accept that everyone is worse off just so that a country with no other advantage can thrive.
If your country's only advantage is to steal tax money
Your assumption seems to be that countries have a right to someone's productivity even after they emigrate elsewhere.
Care to actually defend this point?
Switzerland, Lichtenstein and Luxembourg aren't exactly innocent and the US has done a good job in pushing for measures such as the end of banking secrecy. Other measures such as the OECD minimum tax benefit everyone, and hopefully the US will also push for the implementation of OECD Pillar 2 (to prevent profit shifting).
Yes, but the parent poster’s point still stands
This article is 4 years old, I wonder what are the new figures…
is now left as the single biggest western tax haven in the world.
Only for non-residents though. So you can't have a green card, or US citizenship, and you have to stay well clear of the Substantial Presence Test (https://www.irs.gov/individuals/international-taxpayers/subs...).
i am surprised by your opinion
it is fundamentally and deeply inconsistent to support consumer privacy except for joe six pack’s LLC for his general contracting business
financial privacy is hugely more important than google knowing whether i buy tide or downy
inconsistent to support consumer privacy except for joe six pack’s LLC
Those aren't the same at all. An LLC is a privilege created under state laws and it's perfectly reasonable for those states to require records that the public can access in exchange for that privilege and the benefits it offers.
Having consumer privacy is good for the American public. Having access to know who owns an LLC is also good for the American public. Perfectly consistent.
why do you believe that knowing who owns it is good for the public in all cases? business owners are also a part of the public, you know, while megacorps like google aren’t so much
All cases might be asking a lot, but more often a good for the public than not is enough. The vast majority of business owners are no worse off for that data being available. It's just another cost of doing business, and a fair one I think. Megacorps like google shouldn't be able to hide what they do just by creating a LLC under another name.
A lot of jurisdictions do maintain a beneficial owners database (e.g. Companies House in the UK maintains a list of all companies) but often these are not public. For example the ECJ recently made these illegal in the EU (see e.g. https://www.ft.com/content/e4b31a4e-a79d-40f7-8a19-c1e451a95...).
That may clash with the European Directive on Electronic Commerce for businesses which do anything online. If you just have a shell company to own your yacht, that may be entitled to privacy, but if you do transactions online within the EU, the entity has to be properly identified.[1]
[1] https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX...
Banks require additional paperwork for Delaware-registered LLCs because they can't search the company structure directly at the Secretary of State website (this was explained to me last week).
Why should it be true?
How on earth is this legal?
There's no way to solve this problem short of public, government registration of all cash and assets, which has been done before, but which most people are wary of, and for good reason.
There are so many ways that a person can be the beneficiary of a corporation that is not technically "owned" by them, depending on how you define "own". Does the corporation issues stock? Do they have investor agreements? Is it just a loan agreement? You'd have to register all those different documents. Follow that all the way down and you eventually have to register all assets and cash.
In the end, there's very little legitimate legal reason to have to know precisely who controls an asset or cash, so long as someone is responsible for the public obligations of taxes, unless there has been some crime.
There's plenty of reason. For example, it's often very important whether deals are made between "arms-length" parties, especially where a valuation is involved. If a corporation is allowing me to buy their property for $1, it matters whether that is the fair value, or if the corporation just secretly belongs to my brother and we're avoiding taxes on asset transfer.
The fair value can be assessed independently of that, though -- and frequently, it is anomalies in values relative to fair value that lead to investigations that reveal the non-arms-length nature of a deal.
It's often very difficult to assess fair value when it's not determined by an arms-length transaction. (That's one of the challenges faced by command economies). And even when it can be done, it takes a lot of work to do. Even the price of oil, or shares in a company, can fluctuate on a daily and regional basis. In an individual transaction it's even more difficult -- is this a loss-leader? Or a free sample? -- and when it's a unique, non-fungible good, still more difficult. The price of used assets sold at auction are all over the map. And for some assets there is very little active price discovery in the marketplace. That cryptocurrency that went up in price 1000x shortly after it changed hands, was that just a lucky call? Is that patent really worth $500k? That commercial property that's been without a tenant for nearly a decade, is it really worth an imputed rent of $40k/month when nobody has been willing to rent it at that price? ... But if these two companies signed a contract that values it at that figure as collateral for a loan, then maybe that's the market price? As they say, location location location, right? Etc.
I think you've got something backwards.
The arms-length principle is not literally a requirement to be unrelated. It is a requirement to act that way. If one brother sells another brother a moving truck for 40000 USD, it is an arms-length transaction. If he sells it for 1 USD, that is not. It's a non-arms-length transaction because of the value, not because they are brothers!
In some of the cases you mention, it's difficult to assess fair value even when it's determined by an arms-length transaction, so the sudden disclosure of a relationship would not make it at all straightforward to take anyone to court over it.
The commercial property without a tenant for nearly a decade isn't worth 40k USD / month. When you say "...these two companies signed a contract that values it at that figure as collateral for a loan...", you are describing fraud. That could arise not because of any plan of fraud prior to the loan agreement but because of one formed during it!
I'd say flip that around.
If people own things in their own names, they're welcome to reasonable privacy. But the corporation is a special government program to enable certain kinds of collective action because we get broader economic benefits from things like the ability to limit liability. If people want special government support for financial activities in the broader economy, which is what corporations are, then I say key information should default to being public.
If people don't like that, well, they don't have to use the government program. But like any government program, I think voters should have enough information to be sure that it's not being misused.
Should the names and addresses of all shareholders of all public corporations be public record?
What about private corporations?
It's not like companies didn't exist before the US created LLC's in the 1970's. You don't need legal, registered corporations to have companies. Companies would still exist. And even without explicit limitations on liabilities created by LLCs, any reasonable court is going to limit the liability of a company. It's trivial to create private agreements and EULA's that do effectively the same things as LLC law.
The thing you're failing to realize is that the concept of "ownership" and "benefit" aren't black and white. There are stockholders, investors, beneficiaries, members, clients, subscribers -- they all have at least some level of benefit from a company or organization, and depending on how it is organized, they may have some direct control or liability of it as well.
What you are asking for is mandatory violations of privacy with no legitimate purpose. It's the kind of "if you've got nothing to hide, then you shouldn't be worried" type of mentality that typically isn't tolerated elsewhere.
I suppose when you look at it from this angle, it sounds reasonable. But then when I consider that corporations are essentially eternally existing legal persons which behave like sociopaths, and are able to get away with any crime (even occasionally killing people by accident) as long as they pay a small fine, it makes me a little upset to think that a corporation can do all this and the beneficiaries can be hidden from us.
Imagine if all beneficiaries in corporations had to be publicly known. That means all shareholders, and by extensions all holders of mutual funds, &c (since they hold shares in a trust and the trust holds shares in the corporation, they are the ultimate beneficiary, &c) and thus all participants in retirement funds, &c.
It would mean no privacy for anyone.
corporations are essentially eternally existing legal persons which behave like sociopaths
Some do, some don't. If you make that statement in the context of an actual group of persons it's an example of bigotry. (And a corporation is an actual group of people people.)
Some corporations are composed of one or few people who are all not sociopaths and are very much social contributors. As with a race, gender or religion it isn't fair or accurate to tar them all with the same brush.
good reason.
skeptical of the "good" qualifier.
Historically, registration of assets has been used by government to seize and tax the property of those they opposed.
I don't agree with this at all. Beneficial ownership/shadow directorships/controlled entities/etc etc are well established legal concepts, and many jurisdictions have very stringent requirements to disclose and register those interests. Some - like Delaware, apparently - do not. That's a regulatory/political decision that they have chosen to make.
Would it eliminate shell companies? No (and at the end of the day, dedicated fraudsters will just forge documentation to lie about control/ownership anyway). But it would definitely reduce their usage, which I believe would be a net benefit.
Capitalists choose the laws
First state of America.
I'm waiting for the day when it is all revealed in docs that a human couldn't find but an AI did.
How on earth is this legal?
It massively simplifies reporting requirements. If you’re forming a Delaware entity, you file and go.
The right to privacy, defined broadly as "the right to be let alone" (in speech / commerce) is enshrined in the US constitution, specifically 1st, 4th, and 14th amendments. Other constitutions do not protect this privacy.
Its easy to forget that the US founding fathers wrote anonymously - including the federal papers.
Time will show which constitution outlasts all others.
from the article:
While often partly obscured by secrecy jurisdictions — such as the British Virgin Islands, Panama, Cyprus, or Cayman Islands …..
I wish people were in a place to see where the ICIJ is misguided, like they play into a sentiment that is widely shared but heavily misunderstood
For example, the Cayman Islands was assumed to be super secret and shady and then the results of their information sharing agreement came out and it turns out the Delaware was waaay more heavily used and way more secretive. Jumping the US to the least transparent jurisdiction…. Up from spot number 2.
All this offshore money hiding stigma is capturing the minds of people that are being intentionally mislead. Not by the ICIJ theyre just as misled. just the collective apparatus of a more powerful state that does protectionist things for its own industries against smaller nations states. The US has difficulty bullying its constituent member states, and directs all of that angst outwards to anyone competitive, while the US is a bigger market participant in the same behaviors the whole time!
for both foreigners looking to hide ownership and money, and citizens, the US onshore offers a catalogue thats at parity or superior to financial services microstates, and flies under all scrutiny
the Cayman Islands was assumed to be super secret and shady ... it turns out the Delaware was waaay more heavily used and way more secretive
Ugland House in the Caymans. 10,000sq ft, 5 stories. Registered offices of forty-two thousand companies.
Corporation Trust Center at 1209 North Orange Street, Wilmington, Delaware, United States, "home" to over 285,000 Delaware corporations.
Why is that weird? Company are required to have registered agents in that state (every legitimate Delaware LLC that isn’t based in Delaware (think most of corporate America) has to have someone do this for them (mostly so they can be sued)
Indeed. I don’t think people understand what a Registered Agent is.
Basically it’s a requirement to have someone available as a point of contact for the LLC - typically name, phone and address for mail. This is to ensure that should the LLC need to be contacted, someone is available.
It can be a hassle if you list the owner or an employee as people come and go and companies can be bought and sold. You can list the owner, but it is there responsibility to make sure it’s constantly up to date.
Registered Agents offer a service to act as the Agent on behalf of someone else. The Registered Agent will make sure the phone and address is always up to date and there is always someone on the other end to respond.
It’s basically a “go between” as a service.
So why would anyone be surprised that 40,000+ businesses all use the same agent?
that's a decent example, there are other many addresses and other ways of counting
straight from ICIJ itself "US lands top spot as world’s biggest enabler of financial secrecy in new index"
https://www.icij.org/investigations/pandora-papers/us-lands-...
Meanwhile, the Cayman Islands, which ranked first in 2020, dramatically dropped to No. 14 in this year’s index, after disclosing new data on the financial services it provides to foreigners.
in reality, it should have always been No. 14 or assumed to be operating the way it was, and it was just assumed to be far bigger and shadier than reality. where no information is assumed to mean bad information. that's just not the case. there are robust domestic ways to avoid claims on assets and money even from tax authorities, stigmatizing the entire offshore industry is just protectionist mentality.
Politics would be so much better if we focused on these kinds of arguments instead of people defending their identities as business owners or employees.
instead of people defending their identities as business owners or employees
In a political/economic context, those are not "identities" but distinct roles in a power structure. Their political and economic interests are different and often fundamentally opposed to the extent that they're canonically considered two disting classes: working class* and capitalist class. It is ridiculous to consider them mere "identities."
very true, but you can glean some clues regarding any entities that came before the Delaware LLC, or another state LLC that has a similar name, or does transactions with the Delaware LLC. Or you can search on those you think may be involved with the Delaware target. Their names often show up in other less opaque filings. So, you man not find the smoking gun, but you can sure gin up a lot of smoke.
For sure. By way of further example, if you’re looking into land owned by an LLC (or other entity), the LLC had to be conveyed that land at some point - searching the county grantor/grantee index of deeds will turn up who owned the land before and may be suggestive as to who owns the LLC (or maybe not - maybe ownership of the LLC was conveyed instead of the real property interests specifically to avoid showing up in the county records - it’s a fun puzzle).
In fact many states require LLCs created in other states to register as a foreign entity if they do any business in that state (incl. having a presence there). For example in Massachusetts [0]:
Pursuant to M.G.L. Chapter 156C, §48, a foreign limited liability company doing business in the Commonwealth must submit to the Corporations Division within ten days after it commences doing business in the Commonwealth, an application for registration as a foreign limited liability company ...
I don't know what the privacy laws for foreign entities in registered in MA are (if any), but I suspect not the same as say Delaware. If you have a footprint in more than one state, you may be required to file as a foreign entity in multiple states.
[0] https://www.sec.state.ma.us/divisions/corporations/filing-by...
These are great techniques and helpful advice, but note that they are basically of zero use whatsoever in the case of (for instance) a Delaware LLC.
Also it will almost impossible to link WY LLC with proxy ownership. Much of what really matters are hidden being the wall of client attorney privileges.
Recently there was a book written about Delaware and this problem.
What’s the Matter with Delaware?: How the First State Has Favored the Rich, Powerful, and Criminal—and How It Costs Us All
https://press.princeton.edu/books/hardcover/9780691180007/wh...
Precisely right. There are firms that specialize in listing companies in Delaware and become the official “agent” for the firm.
Figuring out who actually controls it is nearly impossible.
Are there are other sources for details on ownership of Delaware LLCs.
https://www.delawarebusinessincorporators.com/blogs/news/ben...
"A. 3. Under the Corporate Transparency Act, who can access beneficial ownership information?
FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions' regulators will also have access to beneficial ownership information when they supervise the financial institutions.
[Updated January 4, 2024]"
https://www.fincen.goc/boi-faqs
That includes prosecutors and courts.
After an authorised person obtains the information on beneficial ownership from the FinCen database, can they transfer it to their agents. If they share the information with others then will they, in every instance, bind those agents to appropriate obligations of confidentiality. What is the penalty if the information gets leaked, accidentally. If it is leaked, then what incentives are there to pursue enforcement. Arguably, for those affected, it's too late. The information has become public. There is no way to put the genie back in the bottle.
https://www.ecfr.gov/current/title-31/subtitle-B/chapter-X/p...
This reporting requirement is relatively new. Maybe it really changes nothing. We shall see. But the number of parties who potentially have access to information about Delaware LLCs has increased, IMHO. At this point, is it even possible to know who might have it.
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
Genuinely curious: What are the legitimate use cases for shell companies that hide who owns them?
Public figure who doesn't want randos knowing where their house is.
Non-public or public figure who doesn't want their name associated with certain business activities that they partake in.
Both seem counter to the notion of a republic and the accountability needed for private property.
From what I can gather most houses of public figures are already known.
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.
Something like this just happened in Mexico: the president exposed the personal contact info (phone iirc) of some journalist that wrote a piece critical of his government: https://www.nytimes.com/2024/02/22/world/americas/mexico-pre...
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?
What about a "republic" (ie. a nation governed by laws) requires public registration of assets?
A monarchy is also a nation governed by laws.
I’ve answered your question in another response.
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.
It also doesn’t require the government granting the privilege of incorporation.
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.
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.
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.
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.
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.
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, but to keep good guys honest. Same with privacy.
Why not install a camera on your toilet while we’re at it?
Or do you have something to hide?
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.
Just my 2 cents…
Totally agree, and I don’t feel this invalidated my point
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.
If the information in your bio is actually yours, there’s already plenty to work with. :)
I make it pretty hard, actually.
I remember when you could find someone's home address in the white pages of the phone book.
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.
And you could opt out if you wanted.
I guess sending threats then required more of sending a physical mail, which could be used with better effect in dealing with threats?
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?
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.
Don’t like it, don’t incorporate.
Your post looks a lot like: “Individuals have no rights except those given by the government.”
Would you use the same logic for everything else?
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.
is it then the public taking the risk investing their capital into an LLC? No.
If they didn't incorporate, we'd all be much poorer.
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.
Gut feel response:
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.
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.
You can also rent a mailbox at a serviced office who will scan all the mail and email it to you instead of setting up an offshore shell company?
That doesn’t protect you against title lookups. You can go online, find a plot and see who owns it.
I think you have the dichotomy wrong.
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.
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.
This is exactly why we’ve been unable to hold anyone responsible for misuse of their powers in so many instances.
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.
I've seen shell companies used during acquisitions to make it less obvious that FAANG is buying a company.
I'd argue that's not a legitimate use for a shell company. Hiding the entities behind the company should not be legal.
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
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 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
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.
well you need money to get people to do anything you want. if you dont agree there's few countries that might cater to your ideological needs.
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.
One man's gouging is just another's operation of a genuinely free and transparent market.
What is a fair market price? How does it differ from the market price, and who gets to make the distinction?
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?
No need TheWorkNumber and ADP take care of sharing all that information.
I don't even know why shell companies and companies with secret ownership are even allowed. Well, I mean we all know the real reason: because it benefits rich people and they make the rules. But, what would a politician disingenuously cite as the public interest aligned justification for having these entities? Are there legitimate non-nefarious uses?
Yes, privacy. Corporations are often used for trusts and investments. I wouldn't call those nefarious at all, though yes they are mostly only useful for more wealthy individuals. These structures all still pay taxes and are 100% legal. Arguments about tax law being good or bad are really a separate issue, and those should be addressed directly by updating the law, not erasing privacy for wealthy.
As much as the wealthy rightly get shit on for various things, they are still entitled to the same rights as everyone else.
The paying tax and 100% legal is only tested when brought to court, which seems that be chronically underfunded conveniently and I laugh loudly at the belief that 100% of all corporations are in legal compliance.
You said that the rich are entitled to the freedoms as anyone else but shrugs off that only the rich have the effective means to make use of these instruments. They are quite capable of being completely invisible to public scrutiny by holding all their assets as an individual.
They choose to take steps to leverage opaque often intentionally complicated corporate layering schemes to minimize risk, skirt (legally or not) tax, or to layer the sources of bad money.
Whatever the reason for engaging in these games, I believe they are no longer "living life like every citizen deserves privacy" (note your comment spoke of total privacy from oversight which no citizen pretty much anywhere actually has).
I'm at least happy that my home of Canada is starting to chip away the corporate veil.
Your home in Canada just recently demanded blind trusts all report their members personal information to the government. Far from engaging only the rich, that demand hit millions of every day citizens with shared bank accounts with their parents or kids. Those are setup for a variety of reasons, one of which is to circumvent probate tax! Yep, by everyday non-rich people!
However, note that the CRAs information collection did not make your personal bank account information public. Would you prefer that it had? I used the example of a blind trust here because "non-blind" trusts are one of the common uses of non-commercial corporate entities.
Also, I never once said "total privacy from oversight", all these corporate entities already supply financial and ownership information to the government, whose job it is to hold them to account. This is not the same and making information public so a rabid mob of people can enact vigilante justice, or whatever people like you hope comes out of it.
Your home in Canada just recently demanded blind trusts all report their members personal information to the government. Far from engaging only the rich, that demand hit millions of every day citizens with shared bank accounts with their parents or kids. Those are setup for a variety of reasons, one of which is to circumvent probate tax! Yep, by everyday non-rich people!
How does this hurt anyone though? That is not clear at all. The thing you're upset about here is that blind trust members information is reported to the government, but with no clear statement how this hurts anyone, wealthy or not.
Chances are, the information turned over the government has anyway.
If this is a legal mechanism to circumvent probate taxes, then its not a problem. If not, well, even regular people should pay their taxes, no?
even regular people should pay their taxes, no?
Taxes aren't an ethical or moral topic, they are a legal topic. If you can avoid a tax through some legal structure, you are within your rights to do so and you can't judge this as some sort of shady business. Taxes are mostly used to create incentives and collect money, if people are allowed a legal structure to avoid a probate tax, then that might be an incentive on purpose. Just because you did something to pay less taxes does not mean that you are some bad actor exploiting a loophole.
For example, taxes are only paid on profit, so companies are incentivized to spend their money and pay less in taxes. No one sees this as a legal loophole that needs to be fixed, it is very much intentional.
Also you are making the false dichotomy here of "regular people" as something different from "somewhat versed in financial entities people". That's weird.
If you can avoid a tax through some legal structure, you are within your rights to do so and you can't judge this as some sort of shady business.
Sure you can. Legal tax avoidance gets judged all the time. See the Jimmy Carr tax "scandal" that was legal, and yet he received public pushback.
>> How does this hurt anyone though? That is not clear at all.
Allow me to make it clear.
https://www.smithsonianmag.com/history/1938-nazi-law-forced-...
People should pay their probate tax
Say a couple lives in a house. They have a son, who lives with them.
The wife passes away.
1. Should her husband pay tax on her share of the house when it passes to him? Assuming these are not wealthy people, this may force the sale of the house.
2. Should the house go through probate? Should everyone move out while that happens?
The old man wants to leave the house to his son.
3. Should the son pay tax on the house when his father passes away?
4. Should he move out while the house goes through probate?
It is because of cases like these that we have ways to avoid going through probate.
Sounds like something said by a tax collector :)
Everyone who owns shares in a retirement fund benefits from the privacy afforded by these instruments. If every beneficial owner of every corporation had to be publicly registered, that'd be an enormous proportion of the regular public!
Think about what it would mean that anyone could, at any time, look up all the investing choices of anyone in the country.
It would be truly fascinating information but yes in our current level of innovation and maturity, totally bonkers.
It's totally a thing to have trades pegged to US politicians' investment choices, because they often have the knowledge not available to the public to make "better" (financially) decisions.
As per your first comment, this is generally the difference between an active and passive investor which usually works out to someone who owns about 10% of any given company. It's probably a little too high as it isn't hard to imagine a cabal of 11 wealthy tax dodgers playing games with the reporting requirements.
I believe most laws getting enacted which are addressing corporate secrecy are primarily targetting the active owners of companies and usually unnamed beneficiaries who have a benefit to the company/trust who aren't specifically owners, who can reap the benefits of the company's assets without strictly their name of the deed so to speak.
Again, most of this revolves around what is asked by government officials for auditing and less about what information is being dumped into public information.
100% legal is only tested when brought to court
A tangent, but this is in and of itself completely nuts. One should be able to read the text of the law, as written, and understand what you are and are not permitted to do - end of story. There should be no need to look at precedents. Courts only recourse if a law is unclear should be to send it back to an elected legislature for refinement.
Corporations are not people. People deserve privacy. Corporations do not necessarily also deserve privacy.
Who runs a corporation 100% should not be a secret, ever.
If people deserve privacy and corporations are run by people, then logically the people who run corporations deserve privacy.
I'd argue instead that the public's need to know sometimes outweighs an individual's right to privacy.
No. You do deserve privacy, however, you cannot expect it in all circumstances. You cannot expect privacy when walking down a sidewalk, you cannot expect to own a company without anyone knowing that.
Privacy is not deserved. Privacy is a right granted in the US constitution.
There is no explicit right to privacy in the Constitution. People have inferred that right from things like the third and fourth amendments.
But in any case, even if privacy was broadly recognized and protected (it isn’t, otherwise the government wouldn’t be allowed to buy your information from data brokers) that still leaves open the question at hand.
they are still entitled to the same rights as everyone else.
Has there ever been a time when the wealthy had less rights than the poor?
The speeding ticket fine which is charged as a percentage of ones wage comes to mind.
https://www.theguardian.com/world/2023/jun/06/finnish-busine...
Do you mean that fining more for richer people is unfair?
That's an interesting view. One could argue that a flat fine allows rich people to break the law more, because they can afford it. Which IMHO seems pretty unfair.
I agree with it and think there should be more penalties like it.
That’s not really less rights though. That’s like saying the rich have fewer rights under progressive taxation.
And no, generally the more rich and/or powerful you are the more rights society provides you. Even countries which strive for more equality simply try to shore up the most egregious instances but there’s always a difference. That’s because not all rights matter equally to everyone.
For example, rich and poor both don’t have the right to sleep on a park bench but in practice that right is only particularly relevant to one party.
I'm still not seeing it. What are some specific benefits for hiding the benefitting owner of a company? How would society be worse off if the person or people behind a company could always be known?
If you recently won the lottery. You might fear for your safety should your name and address become public knowledge.
Some states allow you to claim anonymously, while others don't. For those that don't, you may be able to claim under an LLC, with your name and address "hidden".
Edge case, but I think it's legitimate.
It is illegal for both the rich and the poor man to steal a loaf of bread. The idea that the wealthy could ever have "less rights" than the hoi polloi is an absolutely hilarious thought.
If any billionaire wants all the "extra" rights of being a normal citizen I'd be glad to swap anytime.
A more prescient example might be the fact that both everyday folks and billionaires are free to say whatever they want on social media in their real name. However only one of them needs to worry that medical bills will bankrupt them if they say the wrong thing.
If privacy was the only reason they would allow any company in any country to be anonymous and identifiable when requested with legitimate reasons (like Domain Names) and accessible to journalists.
Why would it be accessible to journalist? Being a journalist doesn't suddenly make you ethical and responsible.
It is trivial for a wealthy person to be treated like everyone else. They just have to ditch their money.
Unless they want do that, they can endure extensive scrutiny.
As much as the wealthy rightly get shit on for various things, they are still entitled to the same rights as everyone else.
We're not talking about individual assets though here – we're talking about the distribution of resources in our society and the people who own these resources have power over lots of other people.
Essentially - have US$1bn is structurally different to owning US$1 million.
I think they are proposing that rights would change for everyone, not just for the wealthy?
Also, "It's 100 legal" is a pretty hilarious rejoinder to someone discussing changing what is legal.
These structures all still pay taxes and are 100% legal
Any offshoring calls that into question.
they are still entitled to the same rights as everyone else
No, they're entitled to more because they can afford the services of those who can setup shell company structures to hide their wealth and their identities.
I'm not very familiar with shell companies, so I'm curious – why isn't this just a matter of privacy for those involved? I'm generally pretty understanding of pro-privacy-oriented behavior.
I don’t know any other case where someone can own an entity like a house, car, estate, etc. where they get to hide who benefits from it.
You can hide ownership in real estate using land trusts in states that support them. You can fund an LLC with a vehicle to hide ownership of the vehicle by VIN or plate search. In both cases, startup costs are a few hundred dollars, and ~$100-200/year upkeep per asset.
Trusts in general are simply good estate planning compared to probate costs, at least on the topic of real estate holdings and titling.
Could you elaborate on reasons to do so? Using LLC to limit liability makes sense, but I’m not familiar with hiding identity behind a corporation.
Privacy. My use case is obfuscating my life from data brokers. Law enforcement and the tax folks still know where to find me.
Privacy makes sense. Thank you.
New Mexico has fairly decent LLC privacy and you don't have to pay an annual fee to upkeep your LLC at all. Just need to have a registered agent, which can be had for under 100/year.
Appreciate the info!
Those are essentially shell companies.
Not all are bad, but they are frequently abused to not only protect privacy, but to protect against legitimate legal need. It is like hiring a contractor on your house who gives you a false name so they can skip out of town when you figure out they cheated you. There is no legitimate purpose for that degree of privacy. They wanted privacy for the express purpose of providing you no legal recourse.
Pseudonymity is perfectly valid, but there needs to be efficient, effective, and crystal clear means to pierce it and find the actual humans making the decisions with intent when there is a legitimate and well-supported legal need.
Can you cite any research on just how frequent you mean by "frequently". It certainly happens sometimes, but I have found no evidence that is is the norm.
Why does that matter? I said that pseudonymity is perfectly fine, there just needs to be a straightforward and effective means of piercing it when there are legitimate legal purposes. Are you arguing that because it is not a majority of cases that they should be impervious even if there are legitimate legal purposes?
There are enough high profile cases of shell corporations being used for unsavory and explicitly illegal behavior, to the extent that it is literally a meme, such as the crimes unveiled in the Panama Papers [1] that simple and robust mechanisms to prevent abuse are warranted even if abuse is uncommon. It is not like being able to pierce the privacy with a court order is even some new mechanism, you can already do that, it is just expensive, time-consuming, and difficult if they fight.
The cost of providing such mechanisms and properly securing them against abuse have to be weighed against the benefit. In order to know the benefit, we need to know the size of the problem we are seeking to solve, and whether or not the proposed system would actually solve the problem. So yes, knowing the size of the problem matters a lot, and is a good first step to running a cost benefit analysis.
Excellent, since you wish to run a cost-benefit analysis you can first start by citing the research you used to conclude that the abuses of the current system are small. That would give us a baseline for analysis.
It is then easy for you to take the first step in the cost-benefit analysis you wish to do by estimating the costs. The proposal is that a court order demanding disclosure, which are already routinely issued, can not be stalled indefinitely through the application of lawyers. So, all you need to do is identify the balance of cases where disclosure is fought and then see how often the disclosure results in illegitimate harm to the disclosed party versus how often it results in the discovery of legitimate harms caused by the disclosed party.
The disclosures in the Panama Papers alone resulted in 1.2 billion dollars of recovered taxes [1]. So you can compare the estimated costs against the benefits of preventing a singular incident for now. If you can present credible evidence that the harms of requiring disclosure on legitimate court orders is in excess of that, then a broader analysis of the problem size if warranted.
[1] https://www.icij.org/investigations/panama-papers/panama-pap...
They didn't volunteer to do your homework. You were originally asked for a citation on
frequently abused to not only protect privacy, but to protect against legitimate legal need
Shell corporations are used for unsavory purposes being a meme is not proof of this as was implied by your other comment. Also 1.2B in taxes is pocket change so it doesn't really help your point.
Oligarchs using transnational legal arbitrage to avoid paying taxes isn't a matter of privacy.
Nor is it due to the existence of shell companies. Rather it's due to poor enforcement and loopholes in tax law. You also don't need to make any of the information public to enforce it anymore than it's required to make your personal earning information public to enforce you paying taxes.
It's hard to take that position seriously. The people using the loopholes are the ones that pushed to put them in the law and degraded enforcement budgets. One hand washes the other and it takes place in the dark. Let's put a little sunshine on it and see what happens. We might find some very interesting networks exist...
It's about the usage. No single dogma ever makes sense without context. These are abused by many to hide taxable wealth.
It's in the public interest to understand what very powerful people are doing , because the public are usually getting the short end of the stick- this should override any ideology regarding 'privacy', 'freedom' and other fuzzy words (not that some interpretation of these things isn't also important)
because it's a lot easier to have privacy when you're rich
the default for normal people is for all of this data to be public unless you can either navigate bureaucracy (costs time and money) or pay someone to do it for you (costs money)
It is very much a matter of privacy for most folks doing it. And you don't have to particularly be rich to benefit from it.
I'm quite big on privacy rights for indibviduals but I also feel that when corporate wealth (thus, influence on culture and politics) reaches a certain scale, radical levels of transparency become very important for the health of our society. For an extreme example, the public deserved (and still does) to know who were the individuals at Shell devising a decades-long misinformation campaign about climate change -- and that the bullshit they were hearing about climate change being fake was driven by nothing but greed.
To address inevitable replies: No, I don't know exactly where the line is (or lines are - it should probably be a tiered system), and I recognize defining those lines is itself a position of immense power. Those are solvable problems though and don't make the idea bad. (It could still be a bad idea, but for other reasons.)
As a working class individual, you can get excellent financial privacy. You can stick your $10k in savings in cash in a glass jar behind your bed, and neither the government nor big banks nor investigative journalists get to know how much is in thar jar, and they have no say what you spend that money on and when.
A more wealthy individual has no such privacy. Their wealth is not truly wealth and not truly theirs, it is fundamentally a trust-us IOU from a bank or a stockbroker which is shared with all kinds of parties, a publicly visible number on the screen which at any second could turn zero or negative on the orders of a corrupt official or due to a buggy algorithm or mistyped name on a sanctions list.
The more wealthy individual yearns for a glass jar - but no jar is big enough to hold the sums the more wealthy individual operates with.
Hence, shell companies.
The largest glass bottle seems to be 1700L. $1 million is only about 11 liters of $100s. So you could store about $100 million in a glass jar.
At 5% inflation $100M loses almost $14000 of purchasing power per day.
Game theory: Any country can do it, and the company in which the corporation is registered is not going to suffer. So what is their incentive not to allow it?
Ideally it should be votes, but that doesn’t really work out like you’d want :(
Not every corporation is some wealthy shadow network.
The owners of an abortion clinic, or a store that sells fur coats, or a therapy practice for the criminally mentally ill, all might have good reasons why they’d like additional privacy.
It could also be a programmer who is within their legal right to start their own company, but who doesn't want their current employer harassing or singling them out for it.
Further common situations involve trying to keep details out of the public record because they can be abused by bad actors; ones who may be looking to spam you, engage in a frivolous lawsuit, or personally harass you/your family. At least these are some of the scenarios mentioned by companies that do asset protection.
Edit: In regards to harassment, think about the abuse retail, fast food, or other customer-facing employees endure for perceived slights. It feels easy to understand why average small business owners would want privacy and to keep things in legal channels. Personally, I think the government knowing who's in charge (Corporate Transparency Act) is a good halfway point, but it's not unrealistic to be concerned about leaks or abuse with that system.
Are there legitimate non-nefarious uses?
Have you formed an entity? In Delaware it’s file and go. You don’t need a lawyer nor to fill out a bunch of paperwork. That’s efficient. Where we demand disclosure is when that entity touches money through the banking system.
There is a new national law for all corps to have their beneficial owners disclosed to the Department of the Treasury by the end of 2024, and all new firms within 30 days.
Probably backed by those who benefited from it, as another way to to screw young up-and-comers.
any anyone who understands how capitalism works would understand this will never change under capitalism
Why call it capitalism as opposed to a free market? 'Capital' stands for money but the 'market' pressure is why these dark patterns emerge.
Because capitalism is an entirely different concept. Capitalism is an economic system of relations that prioritizes the right to exercise one's existing capital to accumulate more of it, hence the word capitalism. So-called "free markets" is a utopian concept that is not a requirement of capitalism and of course has never existed in any honest sense of the idea.
Free markets arguably exist in the plant and animal kingdoms.
Sure, I can accept that because it is a concept fundamentally at odds with civilization.
Because it's not a free market with those with deep pockets manipulate the rules that get enshrined into law.
Which means there can never be a free market since there will always be people able to bribe and manipulate in order to get their way. It doesn't matter how much oversight and transparency you have, those things can be slowly chipped away overtime and replaced with laws that favor the ultra rich at the expense of everyone else. I'd love to be wrong about that, but I've never seen an example of a country where wealth had no power to influence law.
It's way better under socialism, where there are no up and comers.
This seems to presume that one's wealth is the only measure of individual value anyone cares about, which is just absurd. One can be wealthy beyond belief and still be an up-and-comer in many aspects of their life, and under socialism those aspects would almost certainly have more meaning. I would personally prefer wealth have less meaning and these other things have more, which makes socialism attractive to me.
Socialism is thoroughly materialistic. The socialist state regards itself as owning the productive capacity of its individuals, and tends to the distribution of wealth. The pariah in a socialist society is he who has the capacity for work, but instead lives off the state. Or he who dodges taxes.
Socialism is concerned with distribution of resources to satisfy human needs, and bring about an equitable society. But those needs are material needs, and the equality is material. It's not about redistributing spiritual or intellectual resources to make everyone equally spiritual or smart! It's purely about keeping everyone warm, dry, in good health and with a full stomach.
The only non-materialistic aspect of socialism is the meta level: choosing equitable materialism over inequitable. The idea that all people deserve to be reasonably well off is a different form of materialism from "I want me and my family to be well off, screw the rest" that represents much of capitalism. Socialists regard themselves as supremely virtuous due to clinging to this idea of equality. It is almost religious. There are obvious links between equality in socialism and in Christianity. The proper socialist is like a disciple of Jesus who has renounced everything spiritual, and just remembers the stories about healing the sick, feeding the multitude, and "render unto Caesar the things that are Caesar's".
Material sustenance predominates every other aspect of human society, so the socialists just seem to have their priorities in order when you put it that way.
The law has been declared unconstitutional by a federal judge though, and will likely be overturned entirely on appeal.
What part of the constitution? Not American, don’t know how to find out, but quite intrigued.
The constitution grants the federal government enumerated powers. Since it's not an enumerated power, it's reserved to the states and is therefore unconstitutional.
It falls under the the foreign affairs and national security powers, the Commerce Clause, and the Taxing Clause (plus the Necessary and Proper Clause in support).
Probably the First Amendment using the Citizens United precedent.
From FinCen's website at https://www.fincen.gov/boi. More can be found about the case by searching the title given below.
Red Alert
Alert: Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)
Updated March 11, 2024
On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. The Justice Department, on behalf of the Department of the Treasury, filed a Notice of Appeal on March 11, 2024. While this litigation is ongoing, FinCEN will continue to implement the Corporate Transparency Act as required by Congress, while complying with the court’s order. Other than the particular individuals and entities subject to the court’s injunction, as specified below, reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.
FinCEN is complying with the court’s order and will continue to comply with the court’s order for as long as it remains in effect. As a result, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024). Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time.
Update [March 11, 2024]: This notice was updated on March 11, 2024, to reflect that a Notice of Appeal has been filed regarding this case.
I'm skeptical. There are many laws on the books against illegal business practices. I doubt everyone looking to shield their corporate beneficial owners will go, "Curses! If only it wasn't for this new law!"
It's like KYC laws.
It's both preventative, and it also becomes another easy to prove charge against people circumventing it.
"Shell corporations are companies that don’t actually do any business"
This, I think, is a fairly key differentiator between valid and invalid use of incorporation. If a company doesn't do any business, then it shall not have a right to exist as it has no reason to exist, as the reason companies exist is to do business.
One may argue there are other reasons a company may exist, but I'd argue those reasons only exist as an unintended consequence of the ability to exist as 'shields' or 'cut-outs' as discovered by those familiar with the peculiarities of international law and accounting/finance.
If a company doesn't do any business, then it shall not have a right to exist as it has no reason to exist, as the reason companies exist is to do business.
One typical use of shell companies in mineral exploration is to obfuscate regions of interest from the prying eyes of competitors.
If some wants to gather lease ownership of a large number of small leases in (say) a province of Canada then it's a matter of public record that mining|exploration leases change ownership in public records.
The end goal here is to publicly declare ownership after exploration results (geochimistry, prelim drilling, etc) have been assesed by third party technical reports and put a prospect on the stock market to attract investors. This gets a bit complex when someone else owns a band of rights dead centre through your ROI.
This is a use of shell companies that's distinct from hiding assets from taxation, it's obfuscation for the purpose of getting ducks lined up before going public.
Why is the lease information a matter of public record?
It's regulation in a great many countries about the globe that mining lease data is recorded and made available to "the public", eg: in the US this is largely handled by the BLM: https://www.doi.gov/ocl/blm-lands-leasing
As to the existantial nature of your question, you might try The Evolution of Resource Property Rights by Anthony Scott, perhaps look back to Roman Doctrine and how their laws carried forward in Western civilisation, look to Chinese history, etc.
There's a brief narrow overview of some of that here: https://www.pheasantenergy.com/mineral-rights-history/ and a whole lot has been written about "The Commons", etc.
So is it a problem that corporate secrecy allows people to do an end-run around the intent of these regulations?
?
The intent of the regulations is to record who is searching for what and where (ie. can be contacted and are responsible for property damage, spills, destruction, etc) to have one prospecter per parcel, etc.
Can you point out a country where it is explicit that the intent is that (say) Rio Tinto has to directly list head office on every lease in the country and cannot spin off a copper division, an iron subgroup, a rare earth exploration subsidiary, etc?
I'm not sure if corporations need a right to privacy...
It's obfuscation not a right to keep a secret .. databases such as
https://www.spglobal.com/marketintelligence/en/campaigns/met...
get around such things through the power of cross referencing. Initially with a lot of manual trawling through microfiche records, later with computer assistance and digital records, recently with fully automated approaches.
No, that statement is a subjective assessment.
Any company, including shell companies, will have business activity on paper. In other words, there are invoices, financing or a combination.
This is why it’s difficult to define shell companies. A more realistic proxy is to look at the ratio of employed people by the particular entity to revenue or some other financial metric.
Most shell companies don’t have many employees while the financial figures might be huge. Again, this might be a bona fide structure as part of an international holding but at least you have an objective filter as a starting point.
This isn't my area but I feel like they might be kind of easy to define. They're wrappers around their inner companies. I'm sure nothing has been done because pretty much every corpo lobbyist represents a company that uses them.
the problem here is that most companies are wrappers around inner companies.
Hasn't there been a lot of talk about AI enabling the 1 person billion dollar company recently?
There are various valid use cases for companies without business. Examples include:
- International holding companies: if there is Coca Cola France and Coca Cola Germany that economically belong together, you might not be able to just merge them into one entity for legal reasons (both countries might require you to have a locally incorporated presence). So to ensure that both always have the same owners, you create an international holding company that owns both of them.
- Investment funds: investment funds (especially passive ones) are companies whose only business is to own shares in other companies. There is no "real" operating business.
- Feeder funds: sometimes, the law requires foreign investment funds to create a local shell company to be allowed to accept investments from local retail investors. In this case, the only purpose of the shell company is to fulfill local regulatory requirements with regards to the legal form if the investment vehicle and to provide investors with someone local that they can hold liable in case things go wrong. There is no real business in such companies.
In fact, it is often regulation that requires you to create shell companies. If you want to get rid of shell companies, you should start by removing regulation that requires the creation of shell companies with no real business except to satisfy the regulators.
Are you not giving more examples of how shell companies are created to get around regulation here?
I.e. an indicator not really following the spirit of the regulation, only the letter?
Not that simple - as in, a company that not yet does business but may. That may be financed for that.
Interestingly, outside the USA, this can be the case! In my jurisdiction (Vietnam) I have to do a yearly audit proving that I do business, or I can lose my license.
Additionally, as the owner I must have up-to-date contact information in a public registry, have at least one employee, and rent a physical workplace where I can receive mail. Officials come by to check once in a while.
I think at worst I've gotten a few extra spam calls from all this, but not even that many. On the other hand, I use the registry to look up companies before deciding to sign a contract with them. A couple of times this has saved my clients or I from being the victims of fraud. I really don't mind it as far as systems go.
Anyway, I agree with you, and for the legitimate cases where "companies that don't do business" make sense, maybe we should create some other instrument to handle them -- because like you, I find that there are a lot of cases that don't make sense.
Sometimes we need to incorporate a shell just to have cleaner legal agreements. A typical investment firm may have dozens of special purpose vehicles just to manage shareholders.
Not shell companies but made me remember They Rule…!
Jesus. Perhaps showing my ignorance but I'm surprised by the amount of overlap these board members have across major companies.
Some of these people are investors or represent investor groups. As such, the group they represent will own stakes in multiple companies, and often have board seats on many of the companies.
Others will be an top executive at one company, and also serve on the board as an advisor of a few other, non-competing companies (usually non-competing).
Those are probably the most common scenarios where some one would serve on multiple boards.
Does that change anything though?
Sure. If Vanguard has board seats it wouldn’t be odd for that person to sit on lots of boards of companies Vanguard invests in.
I am not sure what the concern is in the first place, so I am not sure if it changes anything or not. I was just adding my own perspective on the situation.
They Rule is outdated, but the unfortunate truth is that there's been even more consolidation since it first went online. This is partly due to the consolidation of liquidity through institutional investors. It's one of the consequences of passive investment strategies being dominant among retail investors.
It’s a big club, and you ain’t in it! https://m.youtube.com/watch?v=Nyvxt1svxso
Companies, state dept., politicians, revolving door
holy cow. This is one of the best writeups[1] of "the mess" I've ever seen.
Thanks for sharing.
I felt it quite underwhelming, until I realized it only looked at a handful of companies. Somehow only three of Microsoft board are on other boards? Wow, how puritan of them! Ah, not quite...
I'm with you - it would be better with more data (and the creator has stated he wants to expand to 500 companies, apparently that used to be the number prior to the most recent update which was a while ago).
It's the writeup he has in the "why" section that blew me away. A very sober and deep analysis of why we are where we are and what might be done about it.
I did the apple board and the majority of people weren't on any other boards...
This data appears to be 2021 top 100 companies. Lisa Su is solely listed as a board member of Cisco for example, since AMD had yet (I think?) to eclipse Cisco's market cap at the time.
Just like those Reddit power mods
Has this been updated? I thought it stopped functioning several years ago
I find it ironic in an interesting way that on HN there is such a strong privacy bent generally, but on the topic of financial privacy it seems to be the reverse
There's a marked difference between an individual's right to privacy and that of a business. Shell companies are financial instruments designed to obfuscate ownership, usually for tax evasion purposes. Therefore increased transparency is, for the most part, in the public's interest.
Why is it in the public interest to know who owns a company? Sure for specific groups of people, transparency is in order (elected politicians etc.) but wouldn’t financial disclosure laws work better? Why isn’t it the general public’s prerogative to know that I own 5% of a shell company (LLC) set up specially for the purpose of pooling an investment in a new venture?
shell companies are just companies, suppose the vast majority of which are formed for perfectly normal reasons,
"Corporations are people too, my friend."
If they can have "free speech" and are "legal persons" then the public _surely_ has an interest in knowing who is benefiting (the ultimate beneficial owner) from that corporation's actions.
It's in the public interest only because of the particular way that taxes work.
If sleeping with someone was a taxable event, would that mean that it's OK to spy on people's bedrooms? After all, it's in the public interest.
In principle, I think that taxing only land ownership and pollution is the theoretically fair way to do taxation. And land ownership doesn't require obtaining any data that isn't necessarily known by the government in the first place.
The founding fathers published anonymously to obfuscate ownership of their penmanship.
Would it be in the public interest that their identities were revealed and the lot be killed by the King ?
Individuals should have financial privacy, but corporations are not people (fight me). Trying to equate individual liberties with those corporations is a massive source of societal issues but shills keep advocating for it because it's very much in the corporations interests to have those rights, which when wielded by an entity with such vast resources, puts said entity on a very uneven playing field with any actual humans. As such, we need to level that playing field.
But corporations are just groups of people.
And by removing the privacy of corporations you’re just removing the privacy of people within it.
They're superficially groups of people but the legal reality that makes them exist is the fact that they're legally separate from the people who comprise them.
To put it differently, they're not groups of people, they're a distinct legal "entity" that can then be fractionally owned by people while shielding them from whatever it's doing.
This gives it special powers, you can't arrest a corporation or send it to jail. It can act against the will of some of its fractional owners, it can own its own property, and it can legally participate in electoral politics, beyond how any or all of its owners are legally able to participate.
Sure, but that doesn’t change the fact that eliminating privacy for LLCs is eliminating privacy for individuals.
I think the people commenting on this thread are a subsection of HN and probably not the same ones with strong libertarian viewpoints that people sometimes associate with HN. I would agree there is a weird disconnect here.
its ironic, and sad
Both encryption and shell companies are technologies to achieve privacy, and both are sometimes abused by bad actors.
It's very sad to see commenters here fail applying the same principle to both.
Honest question: What are some examples of legitimate uses of shell companies? I don't know enough about this to know "good" cases, I'm only aware of some bad ones. I can come up with tons of "encryption" good/bad examples but I'm coming up blank on good shell companies.
Honest question: What are some examples of legitimate uses of shell companies?
I have an answer to that, but instead of going down this route, I want to ask you: do you want to defend you right for privacy by coming up with uses that other people would find "legitimate"? Or do you want the right for privacy by default, without having to defend yourself in such a way?
Taxes (normal tax minimization), regulatory compliance (need a local company), liability protection (wall off specific risks), financial liability management (e.g. opco vs holdco debt), etc.
Evading stalkers or organized crime. The state cannot always help
It's very sad to see commenters here fail applying the same principle to both.
I don't think the two are comparable, and just applying "are technologies to achieve privacy, and both are sometimes abused by bad actors" to both as if that's the start and end of the discussion is surprisingly dismissive.
The 'scope' of encryption is fairly limited in comparison to the scope of a company that can operate under the directorship of a person or persons who are entirely protected from any legal responsibility for the actions of said company.
I may be blinded by personal bias, but I just don't see but the most marginal comparison of these two concepts.
Every shareholder in a corporation is a beneficial owner of it. Every holder of shares in a mutual fund -- which is a trust that holds shares in corporations -- is also a beneficial owner of corporations.
Officers of a corporation are different from owners. Typically the role of shell corporations is to hide owners.
entirely protected from any legal responsibility for the actions of said company
Huh, because the public can’t look up who the beneficial owners of a company are despite mean the company has any ability to avoid its legal obligations
Using encryption is never "abuse".
If someone who uses encryption also does bad things, the bad things are the problem, not the use of encryption.
financial privacy is the way you get corruption - i dont care if you dont want anyone to know you spent a bazillion dollars on your yacht, too bad. companies especially dont deserve special consideration in this respect. as a community we could expose corruption and greed at the highest levels if financial privacy ceased to be a thing.
edit: ofc this is what the whole article is about, ive calmed down and read it now :D... still, dont know why these things are allowed to go on
soooo no crypto?
crypto currency? afaik thats not private but trackable. crypto for general privacy? sure, we have a right to communicate in private what i dont like is financial privacy
Put your money where your mouth is and publish all of your bank and credit card statements.
banks have all this info - its already published to 3rd parties via rewards schemes and tbh i wouldnt be surprised if the banks sell it as well. retailers resell it... none of this data is private. in effect i am publishing it already. but as you say, i would gladly have it all posted online for anybody to see if it meant financial transparency for all.
edit: perhaps i wouldnt like my bank balance published... that may make some individuals targets. in thinking about it perhaps i would prefer financial "transaction" transparency. then we would have to guard against huge cash transactions tho somehow. its clearly a difficult topic but its also the source of a lot of the worlds corruption and misery.
The issue with financial information being more out in the open is it also strengthens the most powerful incumbents, most notably states.
Credit scores are a good example of a financial privacy violation used to keep the poorest poorer. When the data leaks and people suffer waves of identity theft a slap on the wrist is issued and 5 free years of credit monitoring are handed out. After year 6, well it's the consumers responsibility to pay for that, not the financial data hoarders.
I think the article is more referring to privacy of corporations. Not many poor people are setting up shell companies.
Privacy, like all tools, is neither good nor bad, but depends on the wielder. Same goes for messaging privacy and crime fighting for example.
I've heard that you can create two LLCs which own each other, and be completely anonymous. This should be possible for regular people to do at a small nominal cost. Not sure if it works in practice!
How exactly would you pull that off without having to create an LLC owned by yourself first? This sounds like just something you heard once, I would love to know more if it's actually a thing.
Awhile ago I did some lay research to see if I could form a Corp that owns itself. Iirc the legislation actually accounts for recursion.
I do not remember if they require the owners to be human though.
Either way I was doubly disappointed...
I do not remember if they require the owners to be human though.
I don't think there's yet any way for a non-human to count as a legal person. Entirely possible there may never be.
Sounds like something in Accelerando.
I see lots of people wanting to go after shell companies here, and with good reasons. But if you live in a country where the state takes away 65% of the money the employer sets apart to pay you, and then your means are precariously sufficient to live in a small one-room apartment and you struggle to sustain an elderly parent who doesn't receive any support whatsoever from that same state that takes your money away for "social security" ... Yeah, then you start looking for "shells". This is the financial equivalent of the cherished right of Americans to have guns.
What country is that?
Many countries have total taxes much over 50% of the revenue for most people, frequently in the range from 60% to 70%, even if this is not at all obvious because the total amount of taxes is obfuscated by splitting them in many parts that are paid by distinct entities, e.g. the employer, the employee and the merchants (VAT or sales taxes), plus property taxes, medical taxes and so on.
Yes, for example the country I live in. But elderly also get support. And if you have lower income, the tax is also less.
The question was in what country do you have to combination of the above. High income tax for low earners and low social security for elderly.
And he is also implying that it's worth to create a shell companies for a single person. Which AFAIK also cost money.
How do shell corporations help you avoid paying income tax? Most countries now require employers to deduct this tax at source, so it's very hard to get out of it. Of course there are things you can try (e.g. your employer loans you money and then uses an offshore employee benefit trust to repay the loan) but tax authorities tend to come down quite hard on this.
Double blind trusts are specifically designed to keep those in control of the assets isolated from public scrutiny and taxes.
The fact the News cycle quickly forgot about who the Panama Papers exposed... proved there is a deeper cultural issue in North America.
This has been going on for over a century, and it is foolish to think one could stop someone's full-time job hiding wealth. =)
Double blind trusts
That’s not a thing.
I can see how you might believe that...
One should get a well paying job in Monaco.
Eh I have a US-centric view. Maybe that term means something in Monaco.
Many boards were controlled by US proxies at one time.
Perhaps things are more transparent now, but I doubt it... =)
Only posers build a private bank in the Cayman islands.
YCombinator accepts Cayman Islands LTDs and LLCs too IIRC.
It's not always about dirty deals of trafficking substances and arms, it's honestly desirable for a corporation to be located in a tax neutral jurisdiction and then the various owners can vote with their feet where to locate themselves according to their individual preferences.
The inevitability of death and the fact that you can't take money with you (and also the fact that people accostumed to a certain lifestyle would find their life pretty lacking in a 0% tax country) would compel the aforementioned owners to cash out and start spending at some time and then non-0% tax countries would get their fair share tax on their capital gains, income as well as consumption.
If a guy never cashes out and never spends, then what can you do? They are just monodimensional, obsessed individuals, perhaps heavily on the spectrum too, that's their tax right there, not a monetary tax but still a huge tax and a heavy burden that they "paid" throughout their lifetime.
They are just monodimensional,
That's not how linear algebra works.
that's their tax right there, not a monetary tax
That's not how taxation works.
perhaps heavily on the spectrum too
That's not how autism works.
Can someone do this with userbenchmark? I'm dying to know what unhinged maniac runs that site.
There is no mention of any company name on userbenchmark's site so there is nothing to search. I guess not selling anything and not accepting donations helps to keep the owner private.
Get the filings for the shell company from secretaries of state. Search for other entities that have the same mailing addresses. Search local records for construction permits, zoning applications, business licenses and suchlike concerning the same addresses. These cross-checks have worked well for me in the past.
These are extremely good tips. The value of the address of the entity may be marginal (a lot of times, the address listed on the formation paperwork is the address of a registered agent services company, which may handle thousands and thousands of unrelated companies) but searching other databases for the name of the entity (paying close attention to spelling and abbreviation - though often, this gets flubbed in other filings) or the person who formed it can turn up some interesting connections.
I was going to post something “low content”, but instead, I will say: please donate to the ICIJ[1] and/or the OCCRP [2] if you have the funds!
Forgive my ignorance, but could you expound a little on what makes these institutions important? Like, why do you consider them trustworthy and what specific good do they provide?
Shell companies, in a sense, have been used to evade local laws and ordinances, even by semi-public institutions. IIRC, Harvard University, for example, used LLCs and law firms to buy land secretly in Brighton and Cambridge, MA against the policies of local governments. It would be good to know the real institutions behind such transactions...
If they can get around it, it’s not against policies.
Policies need to change
Not only those - majority shareholders must always be mentioned when any company is being talked about for any reason. Shareholders should not be able to hide behind a smoke curtain while profiting from destructive corporations. Every company must be named along with its majority shareholders before its ceo.
Where's fucking blackrock and freaking vanguard real owners at, thats the QUADRILLION dollar question
In several U.S. states (Wyoming, Ohio, and others), the ownership information of an LLC is never registered with the state at all. The only information is:
#1, someone who filed the formation paperwork, which can literally be anyone.
#2, a registered agent who will receive mail or an in-person courier deliver for the LLC so it can be sued. This service can be also be provided by literally anyone.
If fees are exchanged for #1 or #2, the payor might be an owner but that’s not guaranteed and the provider doesn’t have to disclose that either.
Actual ownership will be on documents the LLC owner maintains custody of and which can be kept private. They only become relevant if the LLC is sued and ownership is part of the question of the lawsuit. Even then, the LLC can be represented by attorneys who may keep the owner’s identity entirely private.
Related:
On the same website, there is also apparently the following article:
"Following the Money, from Laundromats to Central Banks"
(by Laura Oliver, September 25, 2023):
https://gijn.org/stories/following-the-money-from-laundromat...
Potentially related:
Wikipedia article on Monetary Policy:
The https://opencorporates.com/ site is also useful for finding companies registered using a stolen identity or a fake address that matches yours. In the past, I was a victim of some bad guys registering a shell company using my address in a not-yet-built house. I reported that to the tax officers back then.
I knew a company where they had cookie data for ads. They were able to figure out how tons of companies were related from that. Company A would own a bunch of other companies. But certain people would be common to all of them. Creating connections.
This podcast interview with Brooke Harrington gave me some good insights into how people manage offshore wealth: https://www.preposterousuniverse.com/podcast/2023/05/22/237-...
Don't burn other people's shell companies - start your own.
An awful lot of tax evasion could be solved with just two things:
1. Clear beneficial ownership of any company; and
2. Taxing at source when the beneficial ownership isn't clear.
This particularly applies to real estate. Two of the biggest tax havens now are the US and the UK. The US requires all sorts of financial disclosures from other countries but doesn't reciprocate. The UK (London in particular) seems to exist solely to allow billionaires from sanctioned countries to launder money through real estate. Like that's the entire business model.
Isn’t all of the data available to the government especially in the US via federal banking system?
Every dollar transaction in the world is reported back to banks in Wall St.
Funny. I did a job interview once that covered basically this. Building a full stack app that would track the other companies of a given billionaire.
Looking back at it, I did a bunch of code challenges crazy like that.
I'm much more concerned about the naked corporate lobbying that occurs in every "democracy" on earth than I am shell companies.
Can we now get a guide how to fully obfuscate ownership of shell companies?
Colour me unimpressed.
It's mostly picking up info from the regulators in the various jurisdictions. Glorified alternate UI frontend to public info basically.
That's not nearly enough to untangle what's going on in complicated multi-jurisdiction structures - even for structures not designed to conceal.
To put it into terms hn will understand - it's the equivalent of claiming to deduce how software works from the source code filenames only. I mean yeah kinda, but not really.
Also, article is missing WorldCheck.
Now this would be a good LLM application - something that can query all those sources and dig until the actual owner appears.
Name a company that is legal to run that SHOULD have it's owner's identity hidden...
Only those that dwell in darkness fear the light. Exposing who own these LLC's seems like a solid 'pro-truth' move for America.
Sex toy product design. I happen to speak from personal experience; a family member was working at a conservative job that wouldn't view his side business favorably.
Just for the sake of completeness: do you think the customers of your family member's business have any informational rights to know to whom they are giving their money to? If not, Does that lack of a right translate to every other company? How do you reconcile 'vote with your dollar' without knowing who you are voting for?
I agree that is a sensitive issue - but only in so far as 'gotta cover their ass' from a conservative job... which is... a weird place for a sex-toy designer to be... (which raises far more questions about the quality of toy-design if it isn't supporting a livelihood). Appeasement to conservatives is rarely a good strategy... appeasement through omission of data about who they are hiring seems like your family member put themselves in this precarious situation on their own volition. Everyone's got to eat, though, so can't be too bothered :)
But hiding who you are: feels morally dubious and self serving in that case you present.
I wonder: do you hold the same views when it comes to regular people's online privacy?
No, I hold the privacy of a public company differently than a private citizen. If you do business - the stipulation for that is you should become 'public', in so much that there is a record of who owns a company... it should be the consumer's right to easily access knowledge whom they do business with: we don't live in a contraband-fueled market, our goods and services are 'above board' and should face public scrutiny.
I agree about the transparency when it comes to a business's activity: its goods and services.
But a business's ownership is about the privacy of its owners/stock holders - which are regular people. Saying their privacy is "morally dubious and self serving" is akin to saying regular people's need for privacy is morally dubious and self serving. Is the old anti-anonymity argument of "if you're all legit, what do you have to hide?!"
There is an argument to be made here though when said owner is another corporate entity - that is not a person so maybe it doesn't deserve any privacy.
It would be fair if the customers were given the same ability to pay anonymously.
Maybe escrow services that did not hide their identity would solve the problem (for a price)?
"Vote with your dollar" is for morons. I don't reconcile it because it is irrelevant.
Never before had it crossed my mind that some professional had a load of CAD sex toy blueprints on their workstation.
They actually sculpted the molds by hand, since this was back when 3D printers were crude: https://news.ycombinator.com/item?id=31667798
3D printers only just barely became viable as prototyping tools for molds in the last few years. Specifically the Form 3.
Well, that was a fun read. Thanks for sharing.
Well that's a different issue, that's like hiding my identity because some company won't hire people of my colour.
You don't fight discrimination by making yourself anonymous.
Not everyone wants to be an avatar for a social ill. Some people just want to live their lives and be left alone.
A company owned by an instagram influencer, youtube celebrity, only fans star, etc to sell their merch could easily lead to doxing the influencer. People in those industries take advantage of loopholes to hide LLC ownership specifically to avoid getting SWATted, having creeps hide outside their house and SA them, etc.
How could this lead to doxxing?
Lead to? It is doxxing.
How? If they're selling a service, knowing who you're buying from isn't doxxing.
Who you do business with is up to you, and you are totally free to avoid firms that won't answer your questions about their ownership structure.
That's got nothing to do with attempts to force business owners to submit sensitive personal information into a central database, which you wouldn't even have access to unless you had corrupt influence over the organization maintaining it.
Knowing who owns the LLC is ever so slightly different than also knowing their home address. Knowing THAT someone owns company X doesn't mean you know their location as well.
That's all I care about or want: To know 'who', not where 'who' is.
Yeah, once you have someone's name, as well as some other identifying info such as approximate location and age finding out where the live is rather trivial.
Heck, some states list the address of the owner.
One of her friends registered an llc with herself as the owner, and one of her followers looked her llc up and found her real name and address via the state llc registration web site. He then hid in the bushes outside her house and "surprised" her. Leading her to close the llc and move.
Right, and then you can check out where they live and whether they're nice people.
Seems good to me.
A company that specializes in helping people escape from horrible rulers would be an example. Not everything deserves to be public. There are always as many good reasons to hide as there are entities that need to be hidden from.
If a company that specializes in upsetting “rulers” their security shouldn’t be security through obscurity and it would be harder to trust than Former Spec Op Dudes Name Incorporated
Because if you insist on privacy for the “helping people escape rulers” business the money laundering and criminals will suddenly be in that building!
Criminals and launderers have never and will likely never need to incorporate. Sure, it's a tool they might use, but at best you'd take some of their margins away from them. Doesn't seem like a great trade to me, stealing some of the criminals profits in exchange for exposing the people who need privacy.
Launderers are always incorporated. If they weren't, they wouldn't be able to launder.
that's not true, you can launder money many ways without incorporating or even using a company...just one example would be paying cash for used vehicles and reselling them...or buying crypto mining hardware - that's just off the top of my head as someone with zero experience laundering. I have to imagine the pros are better at coming up with ways than I am...
Not disagreeing with your point, but I would think (personal opinion, so feel free to entirely discard) that there are scales of laundering, and the top end of the scale, where governments should be focusing most energy/worry, couldn't be achieved on a 'personal' basis - although potentially on the mutli-personal basis, but I'd also think that would introduce risk if each person is able to be linked.
Happy to be proven wrong though, and to hear counter-anecdotes (I find it incredibly interesting). Systems and loopholes and patches and 'bugs'.
Well, at the highest scales they launder in plain sight with completely de-anonymized banks and the banks get a slap on the wrist. So that might be considered a different category of problem all together.
As always, obscurity is one (often very helpful) layer of a multilayered defensive strategy. The meme that it's useless needs to go away. If you have a safe at home, you should probably hide its existence, because even if power tools couldn't reliably crack a safe (they can), there's always the $5 wrench strategy.
If I ran a small service for an online game , I'd want to keep my identity secret. A small (but loud) number of gamers are toxic.
I hosted some online game server once and toxic isn't how I'd describe the issue. The people were all nice and gentle, except this one guy, after I banned him for targeted suicide encouragement, he spent months harassing everyone who ever joined the server until I shut it down. Thankfully we didn't know each other's identities.
There was a small game I play, one guy posted a picture of a plane ticket to the developer's country saying "I will come to your house with a gun. This is an actionable death threat". Nothing came of it, banned for one season.
Every single one of them. If you don't want to do business with a firm that's evasive about its ownership, that's your prerogative, but forcing anyone engaged in business to have sensitive personal information about them recorded in a centralized database that will be a beacon for corruption and abuse is invasive, anti-social, and dangerous.
You are of course welcome to post your full name, home address, phone number, social security number, annual income itemized by source, credit score, and any other personal information you feel should be exposed to "light" right here in this thread.
My credit score is 850. What now?
It's funny that every bit of that information is demanded by employers, and they usually don't reciprocate. It's only considered "sensitive" information because our society is incompetent and corrupt. The secrecy that protects the rich and powerful is an artifact of that corruption. In a just and competent society, none of that information could be used against us, because we wouldn't be using identifiers as secret keys, and harassers could be identified and punished.
If you have to hide to feel free, you're not actually free.
Name, address, phone, SSN, credit card numbers, tax returns, itemized income statement, health records, SMS logs, phone logs, email account exports, relationship history.
"Society" is an abstract concept, and the concrete reality that it represents is a large collection of people who are mostly strangers to you, and whose interests and values are by no means guaranteed to align with yours even when they are totally honest.
The same secrecy protects you and me. And at the end of the day, I don't care one bit about "the rich", and "the powerful" are exactly who I want safeguards against.
...the streets would be paved with gold, champagne would flow from the taps, we'd all live to be a thousand, and our pets would speak to us in perfect English.
You are of course free to use HTTP instead of HTTPS for all of your web-based data transmission.
I think I'll stick with imperfect freedom in this reality over perfect freedom in a nonexistent one.
Classic, "if you've done nothing wrong, you should have nothing to hide".
The unscrupulous aspect might not be the company, but the audience. It shouldn't be that hard to imagine that owners of companies might be targeted for harassment, violence, etc., and might even be reluctant to invest in a company at all because of the problems that would come from being publicly listed in association with that company. One might argue that ownership comes with these consequences, but of course the impact might be broader, extending to friends and family members, who wouldn't necessarily have any ownership stake in the business. The Internet being the Internet, this tends to be a particular problem for women and minorities.
Then there's cases where the information could be harmful to the company, not the owner.
There's cases where they're just trying to avoid PR/political problems that can be perfectly defensible, but if you're having to defend them, you've already lost the PR/political battle. The Internet being the Internet, even if they purge all public political positions from their personal discourse, even historical political activity going back well before they ever founded a business could be a problem. I know business owners who make sure their business avoids engaging in anything that would put them on any side of a political or hot button issue, and they extend that to themselves because their name is attached to the business.
Simple example: I know one person who is involved with shelters for battered women. They're fine that everyone knows they're involved in it, but there are some businesses they've invested in where they're a silent partner specifically because their partners don't want the harassment/violence/ill will that can come with that.
Yeah this has worked out so well historically.
The whole point of privacy laws is to allow for the idea of bad actors on the other side of the equation. I'm all for tightening up loopholes but off hand sayings like this are thrown around all the time and they're terrible logic that isn't at all backed up by evidence.
Anyone touching anything in the vicinity of abortion services. Pornography LLC. Any number of anonymous chat platforms.
It seems really weird that you could do business with a company and not know who your actually doing business with. Also, it's kinda weird that there is no expectation of privacy except when you want to hide your assets.
Often no member of the public does business with these corporations. E.g., a corporation set up by a celebrity to own a private home and keep her address out of public databases.
I don't think that's any kind of justification. It doesn't matter whether it's a member of the public or another business or a government agency, there should be a known person or people responsible for the actions of any company to be held responsible for breach of contracts or bad actions. All business is based on contracts of agreements, and the whole thing would entirely fall apart if no one could be held accountable for breach of contract.
There's a lot of talk about the increase in KYC for individuals setting up accounts with banks and other financial institutions for reasons of anti money laundering. And yet anonymity is still allowed (and effectively encouraged) in business ownership which could facilitate far greater amounts of money laundering more easily.
Ever since reading about Mossack Fonseca it has bothered me (not confused me though, since the rules are made by the people who most benefit from it).
That rather misses the point. The entire reason we have corporations is to abstract those issues away. For most routine business it's better to deal with a faceless corporation instead of trying to personalize everything. The corporation itself can be held accountable for contract compliance and in extreme cases you can get a court order to seize corporate assets; that's much easier than trying to seize and auction off the CEO's personal art collection or whatever.
My understanding is that Board members are intended to be personally responsible for actions of the company.
Which is why homeless people and ne'er-do-wells get paid $10 to sign a piece of paper (which remains unread) but states this responsibility for shell companies X, Y, and Z.
Also, by design, shell companies don't tend to have assets worth seizing.
Your understanding is mostly wrong under US federal and state law. Generally Board members are not personally liable for corporate debts. It is only possible to pierce the corporate veil in unusual situations, like if they engaged in criminal activity or illegally tried to put corporate assets into their own names in an attempt to hide those from creditors or violate a court order.
I'll take that under advisement.
I know I'm mixing up limited understandings of Australian and US legislation, and sprinkling on top of that my frustrations with those two fairly strict legislative countries allowing business to be conducted with organisations that have opaque, international ownership structures. It's a glaring hypocrisy (that I'm likely missing a fair bit of nuance due to only a surface understanding) given the ratcheting up of the surveillance state on individuals.
The whole area is something that I would like to gonzo-research as a retirement project.
As a customer or vendor why would I care who the beneficial owners are? Either the product works or it doesn't. Either they pay their bills or they don't. I don't want to waste time digging into their internal details.
If you're a vendor, particularly of financial products, you'll likely be compelled by law to know who the beneficial owners are so that you don't inadvertently supply financial services to a hostile state or sanctioned entity.
The opaqueness is transparently self-serving for those who own the stinkiest parts of our economy. We should demand better.
Besides retail transactions the counterparties know who they’re doing business with, it’s just that the public is not privy to it.
Companies should not be allowed to have secret ownership; I don't give a shit if this data is leaked. Corporations are a legal fiction, and so they have no right to or expectation of privacy, like there should be for persons with e.g. individual tax records.
The basic operation of markets depends on having as little information asymmetry as possible between opposite sides of a transaction, and part of that means knowing who you're doing business with to make informed decisions about the reputation of your counterparty.
Large publicly traded companies sometimes already have pseudo-secret/anonymous ownership, with most of the shares held by a giant mutual funds etc.
Large publicly traded companies are entirely exempted from this legislation.
You are of course free to decide whether or not to do business with an organization based on how well you know/trust the ownership, and decline do do business that are evasive about their ownership at your own prerogative.
I'm not sure why ownership needs to be openly published in advance -- you can always query them confidentially through private correspondence -- or how having ownership compiled into a federal database that you don't have access to (unless you have corrupt influence over the relevant agency) will help you.
It was immediately challenged as soon as citizens could get standing this year
A judge ruled it unconstitutional - narrowly only for the organizations and their members that filed the case - and its currently being appealed by the US gov
its going to the 5th circuit though so rich people don't have to do anything, this regulation is DOA
its interesting what cases make headline news and whats relegated to law journals
It certainly made headlines to people its impacts. 2 of my law firms sent out alerts. (They send out alerts maybe 1-2 per year whenever a significant legal change is happening - I think the last alert was the Wayfair sales tax Supreme Court decision)
yeah I filed a flurry of anonymous LLCs via intermediaries via my lawyer at the end of last year since the new law initially only affects business entities created on or after Jan 1 2024, and older ones starting to need reporting just in Jan 2025
I took one look at the law and figured that I won’t have to do it by 2025 because it’ll get declared unconstitutional
so far my bingo board is working out
I mean, I think the whole point of the act is to stop "rich people" from maintaining privacy/secrecy in regards to the businesses they own. And that's a good thing.
You seem to be under the impression that the Act will have its intended effect and that OC was bemoaning that. I read this as, "with the Act in place, how will its intent be subverted by those in power"
No, the act has little effect on "rich people". It applies only to non-public firms with 20 or fewer employees, and exempts most firms in the banking and finance industries.
It encumbers your local barbershop and the mom-and-pop restaurant on the corner, but the "rich people" get a pass.
It turns out that "rich people" have as much right to maintain the privacy of sensitive personal information as anyone else.
isn't the CTA US only? or would it have jurisdiction for a structure in UAE, Channel Islands, Dublin, or Luxembourg etc.
When it comes to actual personal wealth management (not corporate tax optimization) there is also Austria, Lichtenstein, Geneve, Monaco, etc which are all very livable for HNWI and their families.
Lichtenstein isn't super livable, there is absolutely nothing to do in Vaduz.
Geneva and Monaco sure but one thing you have to realize about Geneva/Monaco is that for simply HNWI(UHNWI is 25 mil and up) Monaco is too expensive and Geneva has a horrible ratio of living costs to living quality(the expensive hotel quarter is right next to the "open drug/prostitution market at midnight on a Saturday" quarter). Geneva basically lost its lustre for 10-20 million networth foreigners after Cologny became saturated and overpriced over the last 10-15 years.
Did you mean Andorra, not Austria?
By hiring ex-CIA Agents having experience with setting up shell corporations after said act.
Then I ask the same question you just sidestepped: how will the ex-CIA agents maintain privacy/secrecy after the Act?
Ask them, I’m not a subject matter expert on such things. I can however infer they will have that capability because shell corporations are a fundamental building block of all their ops.
Doesn't it only apply to new filings? Aren't all the old entities grandfathered in?
No. New entities have a 90-day window to file. Entities existing before 2024 must file no later by Jan 1 2025.
We could extend this argument to individual taxpayer info too. Have these things happened with taxpayer info, and does that mean the IRS shouldn’t get to know where you live?
Actually, yes. Same with voter registration. Hell in WA state voter registration is public knowledge, along with whether you voted in any given election.
Try it if you want it, but read the terms of service. Lots of "if you use this for advertising it's a felony" for anyone looking to grift
https://www.sos.wa.gov/washington-voter-registration-databas...
In the UK, all of that information is freely available to anyone via Companies House.
Rich people get out of it because all their main hidey-holes (Banking, Insurance, etc) are exempted.
The BOI requirements of the CTA were recently ruled unconstitutional (as exceeding federal commerce-clause power and encroaching on powers reserved to states) in the first major test case before a federal court. [1]
Since it was ruled unconstitutional on reserved powers grounds, they didn't even reach the 4th amendment implications, but there may be further consideration as these cases make their way up the court heirarchy.
It's definitely not certain that this database is going anywhere.
The same way they do now. The CTA as formulated was only binding on non-publicly-traded companies with 20 or fewer employees. It also explicitly exempted companies whose primary business activity is financial services or asset holdings. This is why many regard it as an attack on small business disguised as an accountability measure for big business.
[1] https://www.thomsonreuters.com/en-us/posts/corporates/cta-un...