Editorial: Openness has big loophole

Tuesday, May 3, 2005 | 9:39 a.m.

For entrepreneurs who wish to keep their identities concealed, conducting business as a Limited Liability Company, or LLC, has advantages over conducting business as a corporation. Members of LLCs are not required to meet as a board of directors, which means that no written minutes or annual reports are required. Stockholders of a corporation must be individuals, but members of an LLC can also be corporations, other LLCs and even foreign entities, according to the IRS. This creates a maddening maze for anyone seeking to learn who actually controls an LLC. And unlike directors of a corporation, LLC members do not have to reveal their names when registering their company with the Nevada secretary of state.

As Las Vegas Sun reporter Steve Kanigher reported on Sunday, the only way Southern Nevada residents can learn the identity of LLC members is when their company does business with a local government, either through land swaps or contracts. Even then, however, full disclosure is not required. Clark County, for example, requires the names of only those members whose ownership in a company amounts to 5 percent or more. This means that in a company of 20 members, owners of 93.1 percent of the company could remain hidden if 19 claimed 4.9 percent each. The 20th member, with a 6.9 percent claim, would be the only one required to be listed. The city of Las Vegas is stricter, requiring disclosure by any member with a 1 percent interest or higher.

For competitive reasons, owners of companies often want to remain anonymous to the general public and that's their right in private transactions. When it comes to doing business with government, however, the nearly 74,000 LLCs in Nevada should be held to a standard of 100 percent ownership disclosure. The public has a right to know who is getting contracts, who is seeking building permits, who is getting tax breaks, who is getting zoning variances and who is making campaign contributions. The public also has a right to know who is profiting from deals on public land. For example, the investigation into questionable land purchases from McCarran International Airport by several LLCs is being hampered by difficulty in uncovering the identities of a majority of the owners.

Private business is one thing. But people involved in public business should fully identify themselves and not hide behind LLCs.