Saturday, December 5, 2015
Do we have to go back to the creation of LLPs to remember a time when an organizational form was so much in the news?
First, as my co-blogger Joshua Fershee pointed out, news of Mark Zuckerberg’s investment/charitable/political vehicle, the Chan Zuckerberg Initiative LLC, has been making headlines over its structure.
Beyond that, however, the New York Times has run a couple of stories now on the growing use of LLCs in the real estate market – both to hide the identities of wealthy foreign investors in Manhattan property and perhaps skirt bank secrecy laws, and to shield the identity of fraudsters who scam people out of the deeds to their houses. As a result, New York is imposing new requirements for disclosure of LLC members involved in real estate transfers. And this report from the Sunlight Foundation highlights how the minimal disclosure requirements for LLCs has made them a popular tool for obscuring the origin of political donations. It seems there might still be a few kinks to work out in the form, although if jurisdictions go the way of NYC, we'll see patchwork disclosure requirements that apply only within specific areas.
In any event, all of the hoopla about Zuckerberg's initiative provided a valuable jumping off point for discussion in my last Business class, even as it apparently is causing a headache for Zuckerberg himself - the misleading stories that suggest that Zuckerberg is getting a tax break out of this (he isn't; as far as the IRS is concerned, the LLC doesn't exist) have prompted Zuckerberg to put out a statement defending his choice of organizational form. I suppose he has only himself to blame by originally touting the LLC as though it was akin to a charitable effort; as Jesse Eisinger put it, instead of announcing that Zuckerberg was donating $45 billion to charity, the headlines should have reported "Mr. Zuckerberg created an investment vehicle."