Minimizing LLC and Corporate Presence in Public Records.

  1. Introduction

Maintaining privacy can be essential for various reasons, including protecting sensitive information, safeguarding against potential threats, preserving competitive advantages, and reducing harassment. In Texas, while business entities are subject to certain disclosure requirements, there are lawful methods to minimize the public exposure of information. This memorandum provides guidance on some strategies to minimize the public records presence for Limited Liability Companies (LLCs) and Corporations in Texas.

  1. Legal Framework

In Texas, business entities, including LLCs and corporations, are typically subject to disclosure requirements under state law. Key statutes governing public access to business records include:

  1. Texas Business Organizations Code (BOC): The BOC outlines the requirements for the formation, operation, and dissolution of business entities in Texas. It also establishes certain disclosure obligations, including the requirement to maintain a registered agent and registered office address, which are publicly accessible.
  2. Texas Public Information Act (PIA): The PIA governs public access to governmental records, including those held by state agencies. While LLCs and Corporations themselves are not governmental entities, certain information filed with or held by government agencies, such as the Texas Secretary of State, may be subject to disclosure under the PIA.
  • Strategies to Minimize Public Records Presence

To minimize the public records presence for LLCs and Corporations in Texas, the following strategies can be considered:

  1. Use of Registered Agents and Offices: Designate a registered agent and registered office address that is not directly associated with the principal members or location of the business. Registered agent can be third-party entities or individuals authorized to receive legal documents on behalf of the business, shielding the principal members’ personal information from public records.
  2. Form a Trust: To protect privacy, create a trust—either revocable or irrevocable—as the business manager, with a nondescript name like “The 2024 Family Trust.” Unlike other business structures, trusts and their agreements aren’t filed with government agencies, except for the IRS if an Employer Identification Number is needed. The IRS, however, keeps such documents confidential, ensuring they remain off the public record.
  3. Confidentiality Agreements: Implement confidentiality agreements with employees, contractors, and other parties privy to sensitive information about the business. These agreements can help prevent the unauthorized disclosure of confidential business records, reducing the risk of such information becoming publicly accessible.
  4. Privacy Enhancements in Formation Documents: When forming an LLC or corporation, consider including provisions in the formation documents that restrict the disclosure of certain information, such as member or shareholder identities, to the extent permitted by law. Consult with legal counsel to ensure compliance with applicable statues and regulations.
  5. Use of Nominee Members/Shareholders: Nominee members or shareholders can be appointed to hold legal title to membership interests or shares on behalf of the actual owners, helping to shield their identities from public records. However, it is essential to structure nominee arrangements carefully to ensure compliance with legal requirements and to avoid potentially fraudulent activities.
  6. Some of the reasons a beneficial owner may use a nominee include:
  • To preserve anonymity and maintain privacy if the beneficial owner does not want their identity disclosed. This is common for high profile individuals.
  • For estate planning purposes, such as transferring shares to heirs smoothly upon death or incapacity. The nominee holds the shares on behalf of the estate beneficiary until distribution.
  • To facilitate joint ventures or business relationships where another entity holds shares on behalf of the beneficial owner.
  • To circumvent restrictions on the number of shares a single sharehold can own in certain industries like banking and media. The nominee splits the shares among multiple minimal holders.
  1. While legally permissible in most cases, excessive use of nominee shareholders can raise issue like lack of transparency, tax evasion, and money laundering. Companies may require disclosure of beneficial owners behind nominee shareholders to avoid such abuses. But overall, nominees are a lawful means for beneficial owners to hold shares indirectly.
  2. Opting for Private Registration Service: Some private companies offer registration services that provide an additional layer of privacy by listing their address as the registered office and acting as the registered agent on behalf of the LLC or corporation. While this option may incur additional costs, it can offer enhanced confidentiality.
  3. Regular Monitoring and Compliance: Continuously monitor public records, including filings with the Texas Secretary of State and other relevant agencies, to ensure compliance with disclosure requirements and to promptly address any inaccuracies or unauthorized disclosures.
  1. Conclusion

While Texas law imposes certain disclosure requirements on LLCS and corporations, there are various strategies available to minimize the public records presence and enhance privacy. By carefully considering the options outlined in this memorandum and seeking guidance from legal professionals familiar with Texas business law, businesses can take proactive steps to safeguard sensitive information and maintain confidentiality.

Disclaimer. Please note that this memorandum provides general guidance for educational purposes and does not constitute legal advice. For specific legal questions or concerns regarding your business’s privacy strategies, it is advisable to consult with a qualified attorney experienced in Texas business law.

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