Overview

Nominee structures let someone other than the beneficial owner appear in public records, corporate filings, or title documents. Common forms include a nominee director, nominee shareholder, a corporate registered agent that acts as a public face, or a named trustee/agent holding legal title for the real, or “beneficial,” owner.

When used as part of a documented, lawful plan, nominee arrangements can limit public exposure and make opportunistic claims harder to direct at an individual. However, they are not a cure-all: nominees do not erase tax obligations, and modern transparency laws limit how effectively they can hide beneficial ownership (for example, U.S. beneficial-ownership reporting under the Corporate Transparency Act). For authoritative guidance see FinCEN and the IRS (FinCEN; IRS.gov).

How nominee structures work (plain language)

  • Beneficial owner vs. legal title: The beneficial owner enjoys the economic benefits and control; the nominee holds legal title or appears on public documents. Documentation (nominee agreements, powers of attorney, trust instruments) defines the relationship.
  • Typical assets: real estate, business equity, bank accounts, and securities — though banks and regulators increasingly demand beneficial-owner disclosures.
  • Common vehicles: nominee shareholders with an LLC, nominee directors for companies, registered agents that accept service and shield owner addresses, and trustees or agents who hold legal title.

In my practice I use nominee arrangements sparingly and only as one part of a layered plan that includes insurance, properly formed entities (LLCs or trusts), and clear written agreements. I always advise clients that the nominee is a public face, not a legal shield from all liabilities.

Legal, tax and reporting realities you must know

  1. Beneficial ownership and FinCEN: The Corporate Transparency Act (CTA) and implementing FinCEN rules (effective reporting since 2024 for many entities) require many companies to report beneficial owners to FinCEN. Nominee arrangements cannot defeat federal BOI reporting requirements in most cases (FinCEN).
  2. Tax rules: For tax purposes the IRS looks at substance over form. If you retain control and benefits, you’re typically the taxpayer for income, capital gains, and reporting obligations (IRS). Foreign-account reporting (FBAR/Form 114 and FATCA/Form 8938) still applies to beneficial owners even if an account is titled in a nominee’s name (see IRS/FinCEN guidance).
  3. Fraudulent transfers and creditor claims: Transfers to a nominee made to thwart known creditors can be voided as fraudulent conveyances under state law. Courts can set aside sham transactions or pierce entities when the nominee arrangement is used to evade liabilities (state court precedents; U.S. DOJ enforcement history).
  4. Anti-money-laundering (AML) and KYC: Financial institutions must identify beneficial owners and perform KYC. Using a nominee to hide illicit activity risks criminal prosecution and asset forfeiture.

Sources: FinCEN (Corporate Transparency Act guidance), IRS (FBAR/FATCA and general tax rules), DOJ AML and asset-forfeiture resources.

When nominee structures make sense

Use nominee arrangements only when they fit legitimate goals and are part of a comprehensive plan:

  • Privacy: Protecting home addresses, preventing doxxing, or keeping ownership out of casual public searches. Example: authors, artists, or professionals who need personal privacy.
  • Succession and estate planning: Nominees in combination with trusts can simplify transfers and keep family ownership private.
  • Business operating separation: Distancing passive investments from operating businesses where exposure to lawsuits is higher.
  • Safe third‑party management: When an independent trustee or nominee with fiduciary duties is needed for confidentiality and neutral administration.

Never use nominee structures to hide assets from courts, creditors, or tax authorities. Intent to defraud triggers civil and criminal remedies.

How to set up nominee arrangements the right way

  1. Work with qualified professionals: Use an attorney and tax advisor experienced in asset protection and state corporate law. In my work I involve both to coordinate entity formation, tax reporting, and contractual language.
  2. Use clear, enforceable documentation:
  • Nominee agreement: spells out that the nominee holds title on behalf of the beneficial owner and lists powers, duties, compensation, and indemnities.
  • Power of attorney or agency agreement: defines authority to sign, transfer, or manage assets.
  • Escrow and payment flows: keep funds traceable to avoid allegations of concealment.
  1. Combine with appropriate owners: Often the nominee is paired with an LLC or trust that is the beneficial owner. The LLC operating agreement or trust instrument should align with the nominee agreement.
  2. Maintain records and transparency with advisors: Keep contemporaneous records showing economic benefit and intent. If requested by regulators or courts, you must be able to prove the substance of the arrangement.
  3. Meet reporting and tax obligations: File required reports (BOI where applicable), report income and pay taxes, and comply with FBAR/FATCA rules for foreign accounts.

For practical guidance on protecting real estate and titles, see our article: Protecting Real Estate Assets: Trusts, Titles, and Insurance.

Risks and common mistakes

  • Treating nominee documents as decorative: Weak or ambiguous agreements invite litigation and can be disregarded by courts.
  • Choosing unreliable nominees: If a nominee steals assets or mismanages them, recovery can be costly and uncertain.
  • Ignoring beneficial-owner reporting: CTA/FinCEN reporting obligations start Jan 1, 2024 for many entities — noncompliance carries penalties (FinCEN).
  • Tax noncompliance: Trying to use nominees to avoid reporting taxable income or foreign-account disclosures leads to serious IRS penalties and criminal exposure.

See our guide on ethical strategies and compliance: Ethical Asset Protection: Legal Strategies That Withstand Scrutiny.

Real-world examples (anonymized, illustrative)

  • A small-business owner established an LLC to hold a rental property and designated a professional registered agent as the public contact. The beneficial owner paid all expenses and received rent distributions; the structure reduced public visibility without shifting tax responsibility. When audited, clear bank records and an LLC operating agreement supported the arrangement.

  • A physician used a trust and a nominee trustee to hold high-value rental homes to keep addresses off public filings. Because the plan was structured well in advance and insurance coverage was robust, the physician did not lose protection when a malpractice claim occurred against her practice.

These examples reflect lawful planning; outcomes are different when arrangements are created to obstruct creditors or taxes.

Professional tips

  • Start early: Asset protection is more reliable when planned before claims arise.
  • Keep insurance first: Liability insurance (umbrella, professional liability) is typically your first and most effective layer of protection.
  • Document everything: Contemporaneous agreements and bank flows show legal purpose and reduce the risk of later challenge.
  • Use neutral, professional nominees: Corporate nominee services with proper indemnities and reputations reduce execution risk.
  • Revisit the plan annually: Laws and your personal exposure change; plan updates are essential. See our checklist: Personal Asset Protection Audit: Step-by-Step Checklist.

Frequently asked questions

Q: Are nominee structures illegal?
A: No—nominee arrangements are legal when used for legitimate purposes and properly documented. They become illegal if used to facilitate tax evasion, fraud, or money laundering.

Q: Does a nominee owner avoid taxes?
A: No. The IRS taxes the person with the economic benefits and control. Nominees do not eliminate income, estate, or gift tax obligations (IRS guidance).

Q: Will FinCEN knock down nominee privacy?
A: Beneficial‑ownership reporting under the Corporate Transparency Act requires disclosure of individuals with substantial control or ownership of reporting companies; properly filed BOI reports limit the privacy benefit of nominee arrangements (FinCEN).

Conclusion

Nominee structures can be a legitimate, useful component of privacy and asset-protection planning when they are part of a broader, legally compliant strategy that includes insurance, proper entities, and clear legal documentation. They are not a way to escape tax or legal obligations and are increasingly constrained by transparency laws and financial-institution due diligence.

Professional Disclaimer: This article is educational and does not constitute legal, tax, or investment advice. For advice tailored to your situation consult a licensed attorney and a tax professional.

Helpful resources and authoritative sources:

  • FinCEN — Corporate Transparency Act guidance (U.S. Treasury/FinCEN)
  • IRS — FBAR (FinCEN Form 114) and FATCA (Form 8938) guidance (IRS.gov)
  • U.S. Department of Justice — AML and asset forfeiture resources

Internal resources referenced in this article:

(Last reviewed: 2025)