Gordon Law

So you think the Panama Papers only affect corrupt Eastern Europeans? Think again!

You may have read or heard about the “Panama Papers” and thought it was simply an example of Vladimir Putin’s money laundering. While it is true that the reporting to date primarily details the efforts of foreign public officials and wealthy individuals to hide their assets, the outcry may affect the protections of Nevada’s Limited Liability Companies (LLCs).

The Panama Papers are a leaked set of 11.5 million confidential documents from a Panamanian law firm called Mossack Fonseca that provided detailed information about more than 214,000 offshore companies, including the identities of shareholders, officers and directors of the companies. The documents describe how wealthy individuals have hidden money from government regulation, taxation and public scrutiny using shell companies. Some of the shell companies may have been used for illegal purposes including fraud and drug trafficking.

A Nevada company, M. F. Corporate Services, is alleged to have been involved with the Mossack Fonseca law firm in its efforts to create the shell companies, including Nevada LLCs. The involvement of a Nevada company is not the only link to Nevada in this case.

Nevada LLCs provide vast protections for business owners ranging from true elimination of personal liability to favorable tax protections. One of the protections that Nevada LLCs currently provide is privacy of ownership. Unlike other states, when you have a Nevada LLC, you do not need to disclose any information about the owner(s) of the LLC. The benefits of confidentiality are far reaching. In this day and age of identity theft and breaches of financial information, maintaining one’s confidentiality in business holdings can be crucial. Unfortunately because of the abuses of those disclosed in the Panama Papers, Governor Brian Sandoval has indicated his intention to bring the confidentiality component of Nevada LLCs before the Nevada Legislature in 2017.

In addition to the potential disclosure of previously confidential ownership within Nevada LLCs, the Federal Government is looking to spread more sunlight on business owners as well, formalizing a rule requiring U.S. financial institutions to identify the individuals behind the customers of the institutions.  Specifically, the proposed rule would require financial institutions to have policies and procedures to collect and maintain information on individuals who own 25 percent or more of a business.

Gordon Law recommends that if you are thinking of forming a new LLC in the near future, that you do so before there are any changes to the current state and/or federal laws. Although there is no guarantee that the application of change will not be retroactive, there is a chance that any change will be on prospective basis. As such, we recommend you take advantage of the protections currently available while they are available.

Please contact Gordon Law for any questions concerning your LLC or any other business needs.

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