The Promise vs. the Reality of “Privacy LLCs”
In recent years, privacy has become a buzzword in asset protection planning. Many promoters highlight the supposed advantages of forming LLCs in jurisdictions like Wyoming or Delaware, where ownership does not appear in publicly accessible records. Some advisors go so far as to suggest that if you place your assets into a “privacy LLC,” no one will know you own them, and therefore you won’t be a target for lawsuits.
That narrative is appealing—but it’s also deeply misleading. While there are legitimate reasons to value privacy, it is far from a complete shield. Lawsuits are not prevented simply because ownership information is obscured. In fact, most claims are filed without regard to whether an entity appears private or public. Let’s examine why privacy is so limited in practice and why focusing solely on it can lead to a false sense of security.
Using a Privacy LLC as the General Partner of a Limited Partnership
A common technique we use in structuring client plans is to form a Limited Partnership (LP) where the General Partner (GP) is a Wyoming or Delaware LLC. This setup provides at least one layer of privacy:
-
The General Partner is the “face” of the LP in public filings.
-
If the GP is a Wyoming LLC, state records do not disclose the members or managers of that LLC.
-
As a result, someone searching for the LP’s filings may only see “ABC Management LLC” (the Wyoming GP), without seeing the client’s name.
Thus, while a privacy-state LLC as GP of a limited partnership is a useful tool in the toolbox, it should be understood as a minor enhancement of privacy, not a standalone protection strategy.
What Privacy Does and Doesn’t Do
-
What it does:
-
In privacy jurisdictions (Wyoming, Delaware, Nevada), LLC statutes do not require public disclosure of members or managers.
-
A Wyoming LLC acting as GP of a limited partnership can obscure a client’s name from basic state filings.
-
Privacy can deter low-level solicitation or casual “Google research” by opportunists.
-
-
What it doesn’t do:
-
Privacy does not prevent a lawsuit from being filed. A claim is based on conduct, contracts, or obligations—not whether the defendant is listed on public records.
-
Privacy does not prevent service of process. Every LLC must have a Registered Agent, who can be served.
-
Privacy does not survive litigation. Once a case begins, courts can compel disclosure of beneficial ownership. After judgment, creditors can demand complete financial discovery of all assets and entities.
-
How Non-Private States Limit Privacy (Even With a WY GP Over an LP)
Using a Wyoming (or other privacy-state) LLC as the General Partner (GP) of a Limited Partnership (LP) gives you a thin layer of anonymity on public LP records. But the moment your operating companies actually do business in non-private states—like California, Texas, and many others—several ordinary compliance touchpoints quickly narrow or eliminate that privacy.
Foreign qualification & recurring state filings
If an LLC formed under your LP operates in a non-private state, it must register as a foreign LLC there. Most such states require public disclosures in either the initial registration, the annual/periodic report, or both. Typical exposure points:
-
Managers/members or “governing persons.” Even if your LP is the owner and the Wyoming GP is the manager, the names of the entities acting in those roles usually appear on the public record.
-
Principal office and service addresses. You’ll list a real mailing address (and a registered agent). These become breadcrumbs that data brokers stitch together.
-
Annual updates. The privacy you preserved at formation often erodes with each year’s report.
Real property & UCC filings (public records)
If a non-private-state LLC owns real estate or borrows money:
-
Deeds, deeds of trust, mortgages: County land records will show the record owner/borrower (your operating LLC’s legal name) and often the signing manager (which may be your WY GP LLC or a human officer).
-
UCC-1 financing statements: Lenders publicly file against the debtor entity (your LLC). These filings are searchable and tie your operating company to secured obligations—and often to addresses and contact details.
Licensing, permits, and professional/industry registrations
Doing business frequently triggers licensing/permit regimes—contractor licenses, seller’s permits, health permits, local business licenses, short-term rental registrations, etc. These:
-
Typically ask for responsible individuals or controlling entities (sometimes both), and
-
Often sit in public or semi-public municipal/state databases.
State tax & revenue agency footprints
To collect/remit taxes or file franchise/privilege taxes, your entity interacts with state tax authorities. While tax returns themselves aren’t public, associated public reports (e.g., “Public Information Reports,” franchise-tax directory data, sometimes delinquency postings) may surface governing persons or entities. And vendors, landlords, and counterparties commonly ask for state-tax registrations as part of onboarding.
Banking, insurance, and counterparties (non-public but discoverable)
Banks, insurers, landlords, and major vendors must know who they are dealing with:
-
KYC/CDD rules require beneficial-owner disclosure (via certifications).
-
Insurance binders and underwriting files routinely include who ultimately controls the company.
-
Major commercial leases, vendor MSAs, and title/escrow packages often capture signing authority and control.
While these files aren’t public, they’re discoverable in litigation and often leak through data brokers and industry systems.
Litigation & discovery
If an operating LLC (or the LP) is sued:
-
The caption will name the entity; service runs through the registered agent.
-
Discovery (and especially post-judgment discovery) compels production of ownership and control records, governance docs, bank KYC packets, insurance applications, and organizational charts—piercing any practical anonymity that existed.
Tax reporting to investors, lenders, and professionals
Even where returns aren’t public, the structure leaves a paper trail:
-
K-1s, lender diligence packets, CPA workpapers, and attorney deal binders often list partners, GPs/managers, and control relationships.
-
Those documents get shared (investors, banks, title/escrow, buyers) and are easily subpoenaed later.
Thus, while a Wyoming GP can add some insulation, once the structure registers to do business in California or Texas, most privacy protections are neutralized. This is true for many other states outside of the designated privacy states like Wyoming or Delaware.
Why Privacy Alone Isn’t Asset Protection
It’s important to emphasize: privacy is not protection.
-
Real protection comes from substantive legal barriers—charging order protections, strong partnership agreements, layered trust structures, and favorable jurisdictions.
-
Privacy is, at best, a smokescreen. It may obscure ownership for casual observers, but it evaporates once disputes or litigation begin.
-
Asset protection is designed to withstand legal scrutiny. Privacy, alone, does not achieve this.
Focus on Substance Over Illusion
Using a Wyoming LLC as the GP of a limited partnership can add a layer of privacy, but it is just that: a thin layer. Once banking, state registration, or litigation comes into play, privacy falls away.
For most clients, the goal should be clear: focus on the strength of your asset protection structures, not the illusion of secrecy.
Comments
0 comments
Please sign in to leave a comment.