Generational Walls: Structuring Your LLC for Privacy and Seamless Succession

Introduction & Opening Remarks

00:09:22

Michelle Dexter: Hi everyone. Sorry about that! Just as I was getting ready to join, I lost my internet, so hopefully we don’t run into that as an ongoing issue. Looks like if I switch over to our Wi-Fi, I’m okay, so bear with me if you can.

For those of you who have not met me yet, my name is Michelle Dexter. I’m an attorney here at Keystone Law Firm. Starting in about a month, I’ll have been here for nine years, which is super exciting! Francisco Sirvent, who is the founder of Keystone Law Firm, and I decided earlier this year that providing some webinars and educational information out to our community could be really helpful for people. I’m a big proponent of educating people on the documents that they have and how the law works, rather than just keeping that all to ourselves as attorneys. So, I appreciate your time today to come and listen to this webinar on structuring your LLC for privacy and seamless succession.

00:13:39

Michelle Dexter: I’m going to do my best to provide you with some good information today and, hopefully at the end, answer any questions that you might have.

All right, naturally, as a law firm, we have to do all the legal notices. This webinar today is really intended to be informational; it is not intended to give any of you specific legal advice. Everybody’s situation and every legal matter is very unique to them, and so it is important that if you are wanting to do something specific for yourself, you consult with the right professionals to make sure that it actually works exactly the way that you want it to for what you’re trying to accomplish. So, there’s a lot of fine print there. Feel free to come back and watch this on our YouTube channel, slow it down, and go back through it. But I know that’s not the most interesting part of this webinar—at least I hope it’s not!

So, the topics that I want to cover today are:

• What are you going to find on public records?

• What does privacy look like?

• What is an anonymous trust?

• What options are available in other states?

I get that last question a lot from clients. They want to have more privacy and want to know what Arizona does versus some other states, so we wanted to cover some of that. In addition, we’ll also be talking about:

• When is a buy-sell agreement appropriate for an LLC?

• What does an operating agreement look like?

• Why would you consider life insurance as part of your LLC or business?

• What we call the “inside-out, outside-in” theory and how that works for asset protection.

Public Records and Information Visibility in Arizona

00:14:39

Michelle Dexter: Okay. So, regarding public records here in Arizona: if you search the Arizona Corporation Commission, you have the ability to look up any registered LLC or business. As part of that, you’re going to see:

• The principal’s name and address

• The statutory agent’s name and address

• The manager’s name and address (if there is a manager)

• The member’s name and address

• Potentially the organizer’s name and address as well

Those are pieces of information that go on the public record. For a lot of us, we’re starting to recognize that having more information out on the public record isn’t necessarily better. Because of that, a lot of people are looking to consolidate that information and make it a little bit more private.

00:15:42

Michelle Dexter: What most records look like on the public record—and I pulled this up for Keystone Law Firm, so you’ll see Francisco’s name there… One thing with Keystone Law Firm is that we are a Professional Limited Liability Company (PLLC), so having the licensed professionals who are able to operate the business listed is part of the public record requirement. That gives us a little bit of an unfair disadvantage for demonstration because some of that information has to be there.

But for purposes of demonstration, you can see Francisco is listed as the statutory agent. That normally is less of an issue, especially because Keystone Law Firm can be hired as your statutory agent. That way, any legal service documents you might receive for your business would come directly to the law firm.

00:16:51

Michelle Dexter: So that’s not necessarily a giveaway for anything, but you can see the manager listed as an individual named Francisco Sirvent with our office address, and the member listed as Francisco Sirvent with our office address. That information is all just part of the public record.

The statutory agent information is intended to be public because, in order to operate here in the state of Arizona, you have to have someone who can be served legal documents if you’re being sued. But it’s always a good idea—especially if you’re looking to protect some of your privacy—to hire a law firm or a professional statutory agent company to help maintain that privacy.

Your principal, manager, and/or member can be a trust instead of an individual, which can help with privacy. However, state law does require the disclosure of managers and members, and that information is provided on the website.

Structuring LLCs with Anonymous Trusts and Statutory Agents

00:17:56

Michelle Dexter: I wanted to give you an example of what private structuring can look like on the public record. This is one that I pulled from the public record for someone we act as a statutory agent for, so our firm’s information is what’s listed there.

You’ll see the principal type changed from an individual to a business. What they did is create two different types of trusts: one serves as the manager, and one serves as the member, both using the law firm’s name and address for sending information. Looking at this listing, you wouldn’t know who the actual owner of this business is. You know where to serve process, but you don’t know who the true owner is. In some cases, people will use two different trusts, or one trust and a second LLC, just to help provide that extra layer of privacy.

What you want to be careful with is what you name your trust. For many, many years, people would name their trust the “Michelle Dexter Trust Agreement Dated [Date].” We are definitely moving away from that. People can be a little more creative with their trust names. Especially for single women, I do not like using personal names in the trust title. I’ve seen everything used—from people’s favorite islands or favorite flowers to things they hold near and dear to their hearts. You want to make sure that after going through all this trouble, your trust name isn’t “The Michelle Dexter Trust,” or you haven’t really hidden anything!

00:19:07

Michelle Dexter: Make sure, again, that you’re using a statutory agent that is a law firm or a third-party company to protect your privacy. If you aren’t looking to have all of your general mail sent to the statutory agent—maybe because that’s an added expense or inconvenience—consider using a PO Box or a UPS Store mailbox instead of your home address. That gives you privacy while maintaining the flexibility to collect your mail on a timely basis whenever you want.

When you look at a record like this on the Arizona Corporation Commission website, it isn’t giving away any information regarding the true owner because everything points to the statutory agent. Because we act as statutory agents for many clients, there’s no way for anyone to know who the underlying owner is. Furthermore, the trust agreement itself does not get recorded anywhere on public records, so it can be really helpful in that regard.

00:20:19

Michelle Dexter: So, what do you need to do when you want to maintain this level of privacy?

If you’re going to name your trust as the member, omit who the trustee is on the public filing. We don’t want to add the trustee’s personal name on there because that could potentially be a giveaway.

If you name yourself as a manager… Generally, what we recommend when creating LLCs here at Keystone is to set them up as manager-managed LLCs rather than member-managed LLCs, because the member is the owner. If it’s member-managed, the public filing directly reflects ownership.

00:21:26

Michelle Dexter: Now, you can still have a little bit of leeway there. But if you don’t name your trust as the member, and something happens to you as an individual in a member-managed LLC, who is authorized to step in?

I like to name your trust as the member in general, and name you as the manager. But when we’re looking at these privacy setups, your role as manager is structured through a trust or through a separate LLC that we designate.

Just keep in mind that seamless succession is key. If we’ve only named you as an individual person and something happens to you, nobody is authorized to manage that business, take care of things, or wind it down until court probate proceedings are initiated.

Regarding statutory agents: here in Arizona, you can be your own statutory agent as long as you have an Arizona address. However, the LLC itself cannot be its own statutory agent—it has to be an individual manager/member or an outside entity.

00:22:31

Michelle Dexter: You must have a physical place of business or address in Arizona for service of process to occur. When you’re trying to create distance between your personal information and the LLC, using a third-party statutory agent is very beneficial.

Since addresses are on the public record, highly consider using a USPS PO Box or UPS Store box for the trust, or use a law firm/business address. If you use your personal home address, it can lead directly back to you. If I use my home address, someone can easily look up my deed at the county recorder’s office, see that I own the property, and start putting the pieces of the puzzle together. When we design these privacy structures, our goal is to make it so the pieces of the puzzle don’t fit together easily, requiring a lot of chasing, with missing pieces that can never be found on the public record.

Anonymous Trusts and Out-of-State LLCs (Wyoming & Delaware)

00:23:49

Michelle Dexter: Now let’s discuss options regarding anonymous trusts. Trusts do not have to be recorded anywhere publicly, which is where the beauty of that privacy aspect comes in. If you have a standard revocable living trust, it is not on the public record—we don’t record it with the county recorder’s office or with the state. All of the information contained inside your trust remains private to you and, ultimately, your beneficiaries.

Again, make sure you keep your personal name out of the trust’s title. We don’t want the “Michelle Dexter Trust Agreement”; we want something like the “Chandler Love Trust Agreement.” Nobody is going to know who that is tied to. Keep in mind that when signing as “Michelle Dexter, Trustee of the Chandler Love Trust Agreement,” we will want to minimize where and when you have to expose the trustee’s name.

These privacy trusts can still be completely revocable during your lifetime; it does not have to be a complex irrevocable trust. They can also be used for limited, specific assets. While your primary estate plan might be all-encompassing, sometimes you may want to create a dedicated trust specifically for these business assets.

00:24:51

Michelle Dexter: If you already have an existing revocable living trust that includes your personal name, and you don’t want to re-title every single account that’s already set up, you can simply create a new supplemental trust.

For example, my dog’s name is Baz. We could create the “Baz Trust,” where the primary beneficiary of the Baz Trust is the existing Michelle Dexter Trust. That way, we have a new trust whose name isn’t publicly connected to me, which feeds directly into my existing revocable living trust. I can then use the Baz Trust to form LLCs and handle business assets without my personal name being tied directly to the public filings.

00:26:01

Michelle Dexter: This approach is often an easier workaround than re-titling your existing trust and updating all of your assets. You just create this new holding trust that feeds into your primary estate plan.

A lot of people ask me about forming LLCs in other states because they hear about the great privacy benefits. Wyoming and Delaware are often big question marks for clients. Wyoming and Delaware do not require business owners’ names to be disclosed on their public websites, which is a major privacy benefit compared to Arizona.

However, the downside to forming Wyoming or Delaware entities is that you have to pay ongoing annual fees in those states. Most standard Arizona LLCs do not require annual maintenance fees—they are perpetual, with a few specialty exceptions.

00:27:12

Michelle Dexter: For the most part in Arizona, you don’t have ongoing annual state filing fees. Furthermore, if you form an LLC in Wyoming, Delaware, or another state, you still have to register it here in Arizona as a foreign LLC if you are conducting business here.

To operate in Arizona, you must be registered in Arizona. That means you’ll pay foreign registration fees in Arizona on top of the creation and maintenance fees in the other state. So keep in mind that you end up paying for privacy one way or another—whether through out-of-state LLC fees or through creative local trust and LLC structuring.

00:28:24

Michelle Dexter: In many ways, it’s six of one, half a dozen of the other. At the end of the day, if you are doing business in the state of Arizona, you have to comply with Arizona rules, so it just comes down to how you structure things locally to accomplish your privacy goals.

Buy-Sell Agreements and Business Succession Planning

00:28:24

Michelle Dexter: All right. We’ve covered how to set up LLCs to maintain privacy. But once the LLC is in place, one thing people tend to forget about is succession: How is this LLC going to transfer to the next generation? Will it be wound up if something happens to you? Can it be sold, and who will be authorized to make those decisions if you can’t?

There are several factors you definitely want to take into consideration. Buy-sell agreements are typically used for businesses with multiple owners. If you are the sole owner, you don’t necessarily need a buy-sell agreement, though you might still consider a similar arrangement if you intend for a key employee to purchase or inherit the business upon your passing or incapacity.

00:29:31

Michelle Dexter: Most often, buy-sell agreements specifically spell out what happens in the event of a member’s death, disability, divorce, or the termination of a partnership.

(Noticing a participant) Yes, Scott, do you have a question? You’re muted, so you may need to type it into the chat box on the right-hand side using the little chat bubble icon.

Before anyone submits a question, I want to remind everyone that this is a public forum and this webinar will be posted on our YouTube channel. Please keep your questions generic so you don’t inadvertently share personal details.

00:30:42

Michelle Dexter: Going back to buy-sell agreements: as I like to say, a failure to plan results in unintended consequences. You have to think these scenarios through when you are in business with another person. If you don’t formalize what happens during a death, divorce, or breakup, who ends up owning the business?

For example, if you own a business with a partner in a community property state, and that partner gets divorced, their ex-spouse could suddenly end up owning a portion of your business—which was never the original intention! That can be extremely problematic. Similarly, if a partner passes away and their business interest is inherited by a family member you never intended to work or partner with, that creates major friction. Having a buy-sell agreement ensures everyone is on the same page regarding who has the authority to step in if a partner can no longer run their share of the business.

00:31:48

Michelle Dexter: Even for single-owner businesses, I strongly encourage having a comprehensive operating agreement. It should clearly outline who takes over management if the current manager becomes incapacitated, who is next in the line of succession, and how affairs should be handled or wound down. You can also specify whether remaining owners or key employees get a right of first refusal to purchase your business interest.

Some businesses are driven by personal services, while others hold real estate or tangible assets that can easily pass down through generations. If you simply say, “I’m leaving this LLC to my three kids to figure out,” it rarely plays out the way you intended. Specifying clear rules in your agreement is critical.

00:32:50

Michelle Dexter: It is also vital to review these agreements periodically. Creating them initially takes work, so people often say, “Great, we’re done, I never want to look at that again.” But circumstances change. Partners get remarried, new partners join, business valuations shift, responsibilities evolve, and employees change. Reviewing these documents periodically ensures everyone remains aligned.

Funding Business Buyouts: Life Insurance & Installment Notes

00:32:50

Michelle Dexter: Many multi-owner companies utilize life insurance to fund buy-sell agreements upon an owner’s death.

If there are three owners and one passes away, the remaining two owners may want to continue operating the business. The deceased owner’s family will want the financial value of that share, but they may have no desire or ability to run the company. Life insurance payout proceeds allow the surviving owners to buy out the deceased owner’s family seamlessly.

00:33:50

Michelle Dexter: You can even set up life insurance policies for key employees if the succession plan calls for them to take over the business upon your death, using the policy proceeds to pay out your family.

Alternatively, if life insurance isn’t feasible or affordable, some agreements utilize a secured promissory note funded by ongoing company profit installments. However, this is significantly riskier because future business profits are never guaranteed. Life insurance provides a much more secure, fixed guarantee for your family’s payout.

00:34:54

Michelle Dexter: Make sure to review life insurance policy coverage amounts over time. The value of your business in year one or two will likely look very different five or ten years later.

Managing Business Operations & Inheritances Across Generations

00:34:54

Michelle Dexter: You must also formally identify who will manage business operations in your absence due to death or incapacity—whether that is a family member or a key employee. For customer-facing businesses, having a clear plan avoids operational gaps, missing information, and internal fighting over who should take charge. Prepare for the worst and hope for the best. When an LLC holds substantial assets or capital, you don’t want those assets jeopardized due to a lack of advance planning.

00:35:52

Michelle Dexter: Keep in mind that not all of your beneficiaries may want to participate in the business.

For instance, I have three kids. Suppose one child is heavily involved in running the business, but the other two are not interested at all. When structuring your estate and LLC plan, you must account for these differing interests. If two children want their inheritance liquid and prefer to sell the business, but the operating child relies on the business for their primary livelihood (and lacks the liquid cash to buy their siblings out), conflict will follow.

00:36:55

Michelle Dexter: You want to structure the succession plan to protect the business, satisfy the beneficiaries, and preserve family relationships. It is perfectly fine to dictate that the child who has been managing the business will continue to do so, while structuring specific payouts for the other siblings—perhaps restricting sales of business assets until certain conditions are met. Just don’t leave the terms vague.

Establishing this clear succession framework ensures operational continuity without requiring a lengthy court probate process to establish authority. While an LLC seems simple on paper, underlying assets like bank accounts present real hurdles. Banks will not transfer account control or grant access without proper legal documentation verifying who holds valid managerial authority.

00:38:24

Michelle Dexter: The same difficulty applies if the LLC owns real estate and needs to execute a property sale. Operating agreements and buy-sell agreements provide the necessary proof of authority to third parties without forcing your family into probate court.

Furthermore, the person you designate as the Personal Representative (Executor) of your general estate in a will may not be the ideal person to manage your business operations. You should be explicit about these separate roles. Business value can evaporate quickly without effective leadership, so proper management safeguards are essential.

Asset Protection: The “Inside-Out / Outside-In” Theory

00:39:22

Michelle Dexter: The final core topic I want to cover today is long-term asset protection—specifically what we call the “inside-out, outside-in” theory.

An LLC is primarily designed to keep internal business liability contained inside the entity. For example, if you hold a rental property inside an LLC and an incident occurs on that property, a lawsuit claimant’s recovery is typically limited to the assets held within that specific LLC. The liability does not spill out to touch your personal residence, personal bank accounts, or retirement funds.

00:40:29

Michelle Dexter: However, two important rules apply here:

First, do not over-fund a single LLC. If you place five rental properties inside one LLC, you expose the combined equity of all five properties to a single lawsuit. Generally, I recommend placing no more than one or two rental properties in a single LLC to cap your equity risk.

Second, forming the LLC is only the first step. You must properly maintain what courts call the “corporate veil.”

00:41:32

Michelle Dexter: “Piercing the corporate veil” happens when owners fail to treat the LLC as a separate entity. For example, if the lease agreement is drafted in your personal name instead of the LLC’s name, or if rental checks are deposited directly into your personal bank account rather than a dedicated LLC account, a court can rule that the LLC is a sham and hold you personally liable.

You must consistently demonstrate that you operate the business as a separate legal entity. This includes obtaining a dedicated Tax ID Number (EIN) for the LLC and filing appropriate tax returns.

00:42:31

Michelle Dexter: When operated correctly, internal business liability remains locked inside the LLC.

Now, what about the “outside-in” side of the equation? This protects your business assets from your personal liabilities.

If you are sued personally due to an off-duty car accident or personal dispute, we don’t want creditors reaching inside your LLC to seize its rental properties or business assets. Proper LLC structuring prevents personal creditors from forcing a liquidation of the business or its holdings.

00:43:35

Michelle Dexter: Instead, a personal judgment creditor’s remedy against an LLC is typically limited to a charging order. A charging order only gives the creditor a right to receive profit distributions if and when distributions are made from the LLC to you—it does not give them ownership of the underlying assets.

As a business owner facing a charging order, you may choose to alter your distribution strategy for a period of time in consultation with your attorney. While this isn’t about avoiding legitimate debts, it provides substantial leverage to protect core real estate and operating assets from being forcibly liquidated to satisfy a personal judgment.

Q&A and Closing Remarks

00:44:42

Michelle Dexter: That brings me to the end of the planned information for today’s presentation!

As mentioned earlier, I am happy to take any questions. The chat box at the bottom right of your screen (it looks like a little speech bubble) is the best place to submit them. As a reminder, this is a public forum and the recording will be posted on our YouTube channel, so please keep your questions general.

We have a lot of upcoming and archived webinars available on our YouTube channel. Gabe, if you’re able to drop those links in the chat box for everyone, that would be great.

If you would like to discuss your specific goals with an attorney at our office, you can schedule a free discovery call. Our team can evaluate your situation and guide you on the best next steps.

00:45:53

Michelle Dexter: Thank you, Gabe, for posting those links in the chat!

We have webinars presented by myself, by our founder Francisco Sirvent (who handles both legal and financial planning sides), and by Karmi Gutman with Lifestyle Planning, who is a Certified Financial Planner. You can access all past and future sessions on the Keystone Law Firm YouTube channel.

I super appreciate all of you being here today. It looks like we don’t have any immediate questions in the chat, so I will let you all go. I always say you can’t build a community if people don’t show up, and the same goes for these educational events. We want to share this information, and we can only do that when you join us!

Thank you so much for giving us your time this afternoon. Have a wonderful rest of your week, and please reach out to Keystone Law Firm if there’s anything we can do to help or guide you. Thanks for attending!

Transcription ended after 00:49:18

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