6 ms·

Genuinely curious: What are the legitimate use cases for shell companies that hide who owns them?

IncreasePosts 3y ago
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.
- dheera 3y ago
  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.
  - deadbabe 3y ago
    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. :)
    - rrr_oh_man 3y ago
      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?
      - deadbabe 3y ago
        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.
      - csa 3y ago
        > 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…
        rrr_oh_man 3y ago
        Totally agree, and I don’t feel this invalidated my point
    - dheera 3y ago
      > If the information in your bio is actually yours, there’s already plenty to work with. :) I make it pretty hard, actually.
  - excitom 3y ago
    I remember when you could find someone's home address in the white pages of the phone book.
    - avmich 3y ago
      I guess sending threats then required more of sending a physical mail, which could be used with better effect in dealing with threats?
    - deleted 3y ago
      [deleted]
    - klyrs 3y ago
      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.
    - bongodongobob 3y ago
      And you could opt out if you wanted.
  - yencabulator 3y ago
    USA is uniquely dysfunctional in only being able to (mostly) identify people by referring to an address. You could very well have public ownership records without revealing addresses.
- williamcotton 3y ago
  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.
  - Terr_ 3y ago
    > 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.
    - seabass-labrax 3y ago
      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.
      - Terr_ 3y ago
        > 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.
mattbrewsbytes 3y ago
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.
- toofy 3y ago
  This is exactly why we’ve been unable to hold anyone responsible for misuse of their powers in so many instances.
- amluto 3y ago
  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.
deleted 3y ago
[deleted]
amluto 3y ago
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.
- sealeck 3y ago
  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?
  - amluto 3y ago
    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.
  - refurb 3y ago
    That doesn’t protect you against title lookups. You can go online, find a plot and see who owns it.
jandrewrogers 3y ago
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.
abound 3y ago
I've seen shell companies used during acquisitions to make it less obvious that FAANG is buying a company.
- inetknght 3y ago
  I'd argue that's not a legitimate use for a shell company. Hiding the entities behind the company should not be legal.
  - abound 3y ago
    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.
codexb 3y ago
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?
- BLKNSLVR 3y ago
  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?
  - codexb 3y ago
    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.
    - BLKNSLVR 3y ago
      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.

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.

dheera 3y ago
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.
- deadbabe 3y ago
  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. :)
  - rrr_oh_man 3y ago
    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?
    - deadbabe 3y ago
      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.
    - csa 3y ago
      > 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…
      - rrr_oh_man 3y ago
        Totally agree, and I don’t feel this invalidated my point
  - dheera 3y ago
    > If the information in your bio is actually yours, there’s already plenty to work with. :) I make it pretty hard, actually.
- excitom 3y ago
  I remember when you could find someone's home address in the white pages of the phone book.
  - avmich 3y ago
    I guess sending threats then required more of sending a physical mail, which could be used with better effect in dealing with threats?
  - deleted 3y ago
    [deleted]
  - klyrs 3y ago
    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.
  - bongodongobob 3y ago
    And you could opt out if you wanted.
- yencabulator 3y ago
  USA is uniquely dysfunctional in only being able to (mostly) identify people by referring to an address. You could very well have public ownership records without revealing addresses.
williamcotton 3y ago
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.
- Terr_ 3y ago
  > 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.
  - seabass-labrax 3y ago
    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.
    - Terr_ 3y ago
      > 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.

mattbrewsbytes 3y ago

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.

toofy 3y ago
This is exactly why we’ve been unable to hold anyone responsible for misuse of their powers in so many instances.
amluto 3y ago
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.

deleted 3y ago

[deleted]

amluto 3y ago

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.

sealeck 3y ago
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?
- amluto 3y ago
  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.
- refurb 3y ago
  That doesn’t protect you against title lookups. You can go online, find a plot and see who owns it.

jandrewrogers 3y ago

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.

abound 3y ago

I've seen shell companies used during acquisitions to make it less obvious that FAANG is buying a company.

inetknght 3y ago
I'd argue that's not a legitimate use for a shell company. Hiding the entities behind the company should not be legal.
- abound 3y ago
  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.

codexb 3y ago

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?

BLKNSLVR 3y ago
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?
- codexb 3y ago
  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.
  - BLKNSLVR 3y ago
    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.