Nominee Service for LLC or Corporation
- Posted by: admin
- Categories: All Blog Posts, Company Setup, Holding Company, Nominee Service
A nominee in business is an individual hired to act as your representative on public records. Nominee services enable the nominee to replace your name and details with their own on business documents such as articles of incorporation or organization. Typically, the nominee is listed as a director, officer, manager, or member. The use of a nominee serves to maintain the confidentiality of the company owner’s identity.
Nominee Services
A nominee can be anyone, such as a relative, friend, or attorney, but commonly they are simply a name supplied by a nominee services firm.
Using a nominee service is not an ideal method for safeguarding personal information and privacy in most businesses due to the following reasons:
- It presents risks.
- Hiring a nominee does not provide complete anonymity.
- There are other more secure ways to protect your privacy that do not cause undue stress.
The Mechanics of Nominee Services
Forming an LLC or corporation requires filling out articles of incorporation or organization, which require listing the names and addresses of members, managers, officers, or directors on public documents such as your annual report. These details become part of the public record, accessible on the Secretary of State’s online business database.
By hiring a nominee, their name and information replace your own on these documents, making them legally recognized as the owner of your company on state records.
This approach may seem questionable as the nominee has no actual control over the business and the specifics of the arrangement are outlined in a contract between the nominee and the company owner. The nominee is meant to act as a proxy and pass profits and vote as directed, but this ideal outcome is not guaranteed.
If naming someone else as the owner of your company causes concern, it is best to trust your instincts. Hiring a nominee can have negative consequences for your business.
The Dangers of Hiring a Nominee
Using a nominee’s name on a legal document instead of your own poses a significant risk. You are placing the full authority as a member, manager, director, or shareholder in another person, with no guarantee that they won’t act against your interests.
A contract is typically in place, but if the nominee acts against it, enforcing it through the court system takes time and money, and can also result in your identity being publicly disclosed, negating the purpose of using a nominee.
Even if your nominee is a close friend, unexpected events like accidents or disappearance can leave you with the task of dealing with their heirs. Additionally, there is a risk of violating state statutes by committing fraud due to a lack of knowledge about updated state requirements for keeping business information up-to-date.
While many websites offer nominee services, it is challenging to trust their knowledge of local business regulations, especially when some use stock photos for credibility.
Is Total Anonymity Possible with Nominee Services
Hiring a nominee for an LLC or corporation does not guarantee complete anonymity due to an IRS rule. The IRS does not permit the use of a nominee’s name on the EIN application, so the business owner’s identity will be known to the IRS, regardless of the use of a nominee. The EIN application may not be publicly available, but the IRS will be aware of the true owner of the business.
Is the Use of Nominee Services Essential for Privacy Protection?
With FZ Consultancy Registered Agent, you don’t need to resort to nominee services for privacy protection. Our company is committed to privacy and follows the Privacy by Default® policy. We are knowledgeable in state regulations to secure your information from public records. Privacy is a continuum, and our services offer varying degrees of privacy protection. Our basic service includes a business address for listing on public documents, while adding premium mail forwarding or virtual office services in select states provides further protection. For maximum anonymity, you can form an LLC in a state that doesn’t require ownership information or have two LLCs. No need to transfer ownership of your company.
How can we help you?
We at FZ Business Consultancy will assist you in establishing your business in UAE without any unusual costs and constraints. Our consultants with years of experience will make the procedure hassle-free for you. Email us at info@fzconsultancy.com for your queries.