Anonymous Ownership of LLC’s and California Public Filings

It has become increasingly popular for California real property owners to take title to properties in the name of a California or California registered limited liability company.  Owning real property through an LLC can provide some asset protection, limited liability protection and tax benefits as compared to direct personal ownership.  It is also relatively easy and convenient for a family living trust to hold an LLC ownership interest making LLC ownership of real property very useful for estate planning purposes. 

What is less known is that by using an LLC, property owners can also achieve some level of anonymity regarding their ownership of the property. This is because the grant deed of the acquired real property transfers title to an LLC and not to any individual owners.  When the grant deed is recorded after closing, the publicly recorded deed only reflects that the property is owned by an LLC.  The individual owners of the LLC remain anonymous.  

After formation of the LLC, and when the LLC statement of information Form LLC-12 is filed with the Secretary of State, however, this anonymity can break down.  Item 5 of Form LLC-12 requires the manager or members to be listed and item 6 requires an agent for service of process to be listed.  If the LLC owners list themselves in items 5 or 6 of this public document the opportunity for anonymity could be compromised.  In order to achieve anonymity, savvy owners can hire professional nominee managers to list in item 5 and may hire corporate agents for service of process to list in item 6 thereby removing any obvious link between the property, the LLC and the individual owners.  Alternatively, if the owners control other business entities or wish to form special purpose entities, those business entities can also be appointed manager and listed in item 5.  When using a business entity as a manager, owners must also avoid disclosing details about the manager entity which could link them to the real property in question and again blow the anonymity.  There are specific strategies for protecting the identity of owners of manager entities, but they are beyond the scope of this article.

Investors and others wishing to avail themselves of the benefits of owning real property via an LLC should work with experienced counsel to structure the LLC and plan the formation to i) confirm the objective need to use an LLC to acquire the real property, ii) achieve the appropriate degree of confidentiality or anonymity in public filings, and iii) avoid any inadvertent disclosure after closing.  Following a complete and thorough discussion of the client’s objectives, client and counsel can work closely together to develop a plan to structure an LLC or combination of LLC’s to meet personal and business objectives and protect the identity of the owners.     

This e-bulletin was prepared by Holden W. Stein, Esq., Partner of Fathom Law PC, in San Francisco.  Former Chair of the PLLC, holden@fathomlaw.com