How to Maintain Operational Anonymity

How do I maintain operational anonymity after a structure is in place?

Maintaining operational anonymity isn’t easy, which is why most real estate investors worry about being the target of a lawsuit, regardless of the protection in place.

Does this sound like you? You’ve made it to the right place. In this article, we’ll explain:

  • why anonymity is important
  • how to obtain and maintain anonymity
  • who you should disclose your identity to and how
  • what you should do if someone compromises your anonymity

We invite you to read on and learn how to maintain anonymity operationally.

Why Is Operational Anonymity Important?

Anonymity is essential because it stops lawsuits before they start, as belligerent parties will be unable to find the actual target of the suit.

How Do We Obtain Anonymity?

We obtain anonymity by using a variety of tools. These tools include using:

  • an agent trust as the member of your LLC
  • land trust to hold title to a property
  • a separate LLC for operations (vs. operating from your asset holding LLC)

We hide assets using Anonymous Trusts, which allows you to keep ownership information hidden. The Anonymous Trusts keep you safe by owning your LLC and serving as the Title Holding Trust, the name disclosed when filing Articles of Incorporation.

In practice, it would look like this:

When someone goes to research the owner of the real property, the Count Clerk’s records will show the anonymous trust as the owner. Neither the trust owner nor you registered with the state, so your identity is safe.

How Do You Maintain Your Operational Anonymity?

There will be times when you need to maintain operational anonymity throughout running your business. As you continue on your real estate journey, you want to make sure that you protect your investment and your livelihood.

What follows are three common scenarios in which you will want to maintain your anonymity:

#1 How To Purchase A Home

What matters is how you plan to purchase the home. If you buy it:

  • with cash–purchase the house into a land trust using a nominee trustee
  • with a loan–purchase the property, take the loan in your name, then move to the land trust post-closing

#2 How To Enter Into A Contract With A Third Party

When you contract service providers, you will want to interact through an anonymous operating LLC. These providers include, but are not limited to:

  • contractors
  • property managers
  • utility providers

The operating LLC will be the party that contracts with the service provider, and you will sign as the manager of the LLC.

When you contract with a tenant, you will interact through an anonymous operating LLC or a third-party property manager. The operating LLC will be the party that works with the service provider, and you will sign as the manager of the LLC

#3 How To Sell Your Property

When you sell your property, anonymity is not a priority. To sell, you should move the title back to your name and sell. When you sell the property in your name, it simplifies the closing process. Finally–as the seller–you ensure the proceeds check comes directly to you.

What Parties Can You Disclose True Ownership To?

In some cases, you will want to disclose actual ownership. Some of the most common parties to tell include:

  • your bank
  • your lender
  • your title company
  • your insurance agent
  • court officials

How Should I Disclose True Ownership?

Sometimes you may not need to maintain complete operational anonymity and disclose true ownership. When considering whether you should tell your identity to each of the previous parties, ask yourself the following questions:

  • How will the information be used?
  • Will the data be publicly available or privately held?
  • Under what circumstances would you disclose this information to a third party?

What Happens If Your Anonymity Has Been Compromised?

Don’t panic if someone compromises your anonymity. You have options available to you to address the situation. The initialism “STACK” details the steps you should follow:

  • Stop the action until you gather more information
  • Talk to the party requesting the information to understand why the information is needed
  • Assess if you can provide information without disclosing ownership
  • Call your attorney if the information is necessary to see how to give it safely
  • Know who can distribute the information and where

Conclusion

Ideally, it’s clear how to maintain operational anonymity while managing your real estate investment.

Now that you know how to protect your privacy, here are some key takeaways about the protection provided by anonymity:

  • Anonymity is essential, but ultimately the liability protections are your foundation
  • LLCs and trusts can protect your privacy
  • Protect your anonymity by following the guidelines:
    • who can receive information
    • how to sign documents
    • how to ensure records do not end up with third parties
  • If anonymity is compromised, you can take some steps to mitigate the exposure

Do you want to join other savvy investors and learn more about how to protect or grow your investments? Register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST.

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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