NOMINEE MANAGER SERVICES

Bose Corporate Support as Nominee Manager – As if You Were Here in the US

What/Who is a Nominee Manager and Why do You Need One?

Most commercially actively limited liability companies in the United States are managed by either a board of managers (functioning like a board of directors) or an entity/corporate manager.

Foreign-owned LLCs should also be organized to be managed by a manager. In a foreign-owned blocker company structure, the owner may be inclined to appoint one of its foreign-based officers or name one of its other foreign subsidiaries to function as the manager of the US top-tier blocker company and/or of the US subsidiaries of the US blocker company.

The position of legal manager of an LLC is a visible position. The name of the manager is disclosed with the Secretaries of State of each state where the company does business. The name of the manager will be stated on important documents as the contracting party and on all government filings. This level of public exposure creates two very different kinds of risks for the manager: tax nexus and public knowledge.

A Nominee Manager Helps with Tax Nexus Risks

For tax purposes, a foreign company should protect itself and its foreign-based officers and owners from directly conducting business in the US. An individual or legal entity conducting business in the US becomes subject to the US federal tax system and reporting obligations on its global operations. An individual conducting business in the US also becomes exposed to the US estate and gift tax system.

Serving as legal manager of a company could be construed as conducting business in the US. In most cases, the tax risk of establishing business nexus to the US is minimal if the activities are very limited. However, the downside of becoming subject to the US income and estate tax system can be great.

A Nominee Manager Helps Protection of Anonymity

Many inbound clients wish to shield the identity of ultimate ownership of their US entities from public view. The use of a Nominee Manager allows a foreign company to protect from the public (but not from certain government agencies like FinCen and the IRS) the identity of the ultimate owners of the US company.

What Are The Risks Of Using A Nominee Manager?

An inbound company should select its Nominee Manager very carefully and be confident in the references, experience, professionalism, and discretion of the Nominee Manager. The risks of using a Nominee Manager are largely those that arise out of a lack of communication, a lack of responsiveness, or a lack of discretion.

How are these risks managed?

The Nominee Manager should sign an engagement letter that has clear and enforceable confidentiality provisions, instructions for how to take actions, and a fee schedule at a minimum. The company owners should be able to remove the Nominee Manager with or without cause and on written notice but without advance notice.

A Nominee Manager is not empowered to actually take significant decisions or bind your company without proper checks and balances. The scope of the Nominee’s authority will be outlined in the engagement letter and the company agreement/operating agreement of the LLC and will require the Nominee Manager to obtain verification of instructions (often an officer of the instructing foreign company and the US lawyer, for example).

How much do Nominee Managers charge?

The rates vary depending on the scope of work, frequency of communication, and number of actions required. The size of the enterprise and risk factors such as authorization of international or securities transactions and similar risky business endeavors can also impact the fees. Finally, a very public exposure of the Nominee Manager that comes by having its name listed on significant or speculative transactions may demand additional fees.

The costs for Nominee Managers range from approximately $3,000 per year per company to in excess of $25,000 per year per company, escalating or declining based on the actual workload and the number of affiliated companies.

What questions should I ask a proposed Nominee Manager?

References. A Nominee Manager should come referred by experienced lawyers and/or accountants.
Experience and professional background. A Nominee Manager should be owned by degreed professionals with legal, accounting, or compliance backgrounds who understand the scope of work, the nature of the transactions, the confidentiality requirements, and the professional responsibilities involved in verification and establishment of authority.
Availability and Backup Plans. All Nominee Managers should have at least one person available as an authorized representative so that clients can have access during business hours in the US to their services.
Professional Insurance/Bonding. For significant transactions and enterprises, it may be important to request that the Nominee Manager be insured and/or carry a bond. These levels of service will require a greater fee.
Timely Notice of Personnel Changes. The Nominee Manager should provide clear written notice and possible phone or multi-person verification of important personnel changes that could impact the communications chain.

What commitments should I make to the Nominee Manager?

Two Available, Reliable Contacts. The Nominee Manager should be able to contact at least two officers of the company by phone, WhatsApp etc. at all times.
Introduction to professional advisors. The Nominee Manager should know through introduction reliable contacts among your legal, accounting, tax, and similar advisors.
Notice Periods. Your Nominee Manager may expect to have 2 business days’ notice for ordinary course transactions.
Established and Consistent Communications Process. Your Nominee Manager can expect to receive instructions in the same form from the same people iteratively so that trust is established.
Verification and Security. Many Nominee Managers will want to establish a secure online platform for communications.
Periodic In Person Introductions. The Nominee Manager should meet with the persons who manage the relationship in person from time to time.
Timely Notice of Personnel Changes. The client should provide clear written notice and possible phone or multi-person verification of important personnel changes that could impact the communications chain.