Let’s say that, in order to maximize your privacy, you have a friend or business associate serve as the sole officer and director of the corporation. Alternatively, there are companies and individuals who offer these services, for a fee, to newly formed or existing corporations, mostly in Nevada. They promise to follow directions and act as your agent with regard to the corporation. For convenience, we will call your “friend” Gumby. Gumby’s name-but not yours-will now be recorded publicly. If he carefully executes all corporate filings and documents, your name will probably not show up in a search of the databases.
The more difficult privacy issue involves the matter of signature authority with regard to corporate assets. Who should be authorized to sign on the corporate bank account? Although the account itself is in the name of the corporation-with its own Federal Tax Identification number the law requires that the bank obtain the name and Social Security number of every account signatory. If you are a signatory on the account you must supply this information. Your name and Social Security number on the account then provides the link to you-exactly what you were trying to avoid in the first place.
You can eliminate this difficulty by having Gumby as the account signatory-but you have now created serious dangers for yourself. You have made Gumby the sole officer, director, and signatory for all corporate assets-presumably valuable to you or you wouldn’t be going to this much trouble. In essence, you have turned over to Gumby much of what you own. As attorneys, we see so many risks and opportunities for fraud with this type of arrangement that we don’t recommend it for our clients.
One of the largest companies supplying these services was recently raided as part of an IRS crackdown. Computers and files were seized, and criminal investigations are proceeding. Imagine the inconvenience of getting Gumby’s signature on a check when he is operating from the federal penitentiary. If your goal is financial privacy, we will show you that there are safer and more efficient alternatives which will accomplish the desired result.