5. Use Business Entities Such as LLCs and Trusts to Obscure Ownership of Assets
Using an LLC to protect assets such as businesses or real estate is advantageous for many reasons. If your business is a sole proprietorship or a partnership, you and your business are legally the same “person.” Your business debts are also your personal debts. And if your business partner or employee is accused of negligence, your personal assets might be at risk.
An LLC limits this personal liability because an LLC is legally separate from its owners. LLCs are responsible for their own debts and obligations, and although you can lose the money you have invested in the company, personal assets such as your home and bank account can’t be used to collect on business debts. Your personal assets are also protected if an employee, business partner or the business itself is sued for negligence.
LLCs are not all created equal when it comes to stealth wealth. Delaware, Nevada, and Wyoming are known as perhaps the most business-friendly states for an LLC. They are also known as corporate “havens” - especially the state of Delaware.
Delaware is one of the easiest places in the world to set up an anonymous company, making it a great place to establish an LLC to do business that you don’t want anyone to know about or you don’t want to be easily connected to.
Setting up a company in Delaware is extremely quick, easy and inexpensive. Openness advocates like the Financial Transparency Coalition point out that a person needs to provide more personal information to register for a library card than to register an LLC in Delaware. Delaware LLCs are so effective that massive FBI money laundering investigations have been halted due to the true anonymity a Delaware LLC creates.
While Nevada and Wyoming offer some unique benefits, Delaware has a 100+ year history of protecting business privacy. And the state is unlikely to change this stance. One reason Delaware has resisted any change to this system: It’s a huge part of the state’s income.
According to The New York Times, taxes and fees from these absentee businesses accounted for a quarter of the state’s budget in 2011.
While not as easy and far more expensive than Delaware LLCs, Cook Island Trusts are extraordinarily effective. Cook Island Trusts offer anonymity as well as legal protections. The value of the assets in these trusts is not disclosed and it is against the law in the Cooks to identify who owns the trusts or to provide any information about them. No litigant on earth has been able to break a Cook Islands trust, including the U.S. government, which has repeatedly been unable to collect on multi-million-dollar judgments against fraudsters convicted in federal court.