The Corporate Transparency Act's articulated purpose is to "crack down on anonymous shell companies."
Feb 12th, 2021
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Distributors and their executives often form corporations and other legal entities like limited liability companies (LLCs) for a myriad of purposes, including to avoid disclosing the identity of "beneficial owners" – meaning natural persons who ultimately own, benefit or control legal entities – including for example a trust, foundation, or other legal entity. Generally, the ownership structure let alone the beneficial owner(s) of these legal entities is not readily available, even to investigative sources. The formation of legal entities is a matter of state law, and most states collect very little data about the organizer and other aspects of such entities – especially their beneficial owners. Many distributors know that formation of an LLC under Delaware law, for example, is a smart legal move, because the true (i.e., beneficial) ownership can be buried – equity interests owned by trusts, corporations, or other LLCs for a variety of reasons, including liability protection, estate planning, creditor protection and maintenance of the privacy of beneficial owners.