Tax Fraud, Registered Agents, and U.S. Shell Companies

tax investigationA recent exposé looks at the role of registered agents against the larger backdrop of domestic tax fraud and secrecy surrounding foreign bank accounts.


We talked earlier about the Cowboy Cocktail, a potent concoction of an anonymous shell company, a trust, and a willing tax jurisdiction—like Wyoming. In the U.S., other “on-shore” tax havens include South Dakota, Texas, Florida, and Delaware. 


Recent work from the International Consortium of Investigative Journalists (ICIJ) and its partners places a spotlight on the use of registered agents.   


A registered agent is an essential and required contact for a business entity in the U.S. A registered agent is generally required for corporations, types of partnerships, and limited liability companies (LLCs). The agent is paid to be the official recipient for a variety of communications, including legal papers, tax notices, and forms and papers related to the business itself, such as renewal or other notices from a Secretary of State. The agent can also file papers, such as an annual report, on behalf of the business. 


For many businesses, the registered agent is closely associated with the company, but for others, not so much. With the rise of registered agent services, individuals or groups act as agents for companies and business owners whom they have not met. While an attorney may be appointed a registered agent, there is no specialized training or credential required to become the registered agent for an anonymous offshore billionaire. The position requires an address and a willingness to receive or file documents on behalf of a company.


For tax havens like Wyoming, many shell companies are anonymously owned. Local registered agents for these companies are not required to scrutinize the actual owner of the company, or verify that the company is not engaged in money laundering or other tax crime. 


While recent legislation at the federal level aims to pop the bubble of anonymity around these companies by collecting identifying information about company ownership, the number of companies being registered on a yearly basis across the U.S. outstrips resources available to review the data. The ICIJ article reports the number of LLCs registered in Wyoming soared from approximately 4,200 companies to over 220,000 businesses in the last ten years. 


With regard to vetting clients for involvement in criminal tax matters, one registered agent in Wyoming replied, “It’s not my responsibility what a business does. It’s a fraud-friendly state by the laws that are created. Unless the state changes that, I’m just doing my part.”


Experienced legal representation with IRS investigations, audits, and criminal tax allegations

Serving local and international clients from offices in Chicago and Cleveland, the tax attorneys at Robert J. Fedor, Esq., LLC help you respond strategically to questions about tax returns and FBAR reporting, tax controversy, and foreign bank accounts. Call 800-579-0997 or contact us today.


Understanding Tax Fraud