Jackson Hole, Inc.: Virtual Locality, Hundreds of companies headquarter in the Hole, but who are they?

By on March 31, 2015
Rebecca Bextel (top), at Mountain Business Center, which also houses a sparkly kitchenette and relaxing meeting spaces. (Photo credit: Jake Nichols)

Rebecca Bextel (top), at Mountain Business Center, which also houses a sparkly kitchenette and relaxing meeting spaces. (Photo credit: Jake Nichols)

Jackson Hole, Wyoming, offers outdoor recreation and sightseeing opportunities galore. The valley is home to dazzling vistas and abundant wildlife free to roam its rugged and pristine landscape. Travelers flock to the Rocky Mountain mecca in numbers sufficient to call the tourism industry the undisputed economic driver in Teton County.

Another industry is booming in Jackson, though, and it doesn’t require any visitation or habitation. Tens of thousands of companies are currently registered in the state of Wyoming, many of them in Jackson. What a majority of these companies have in common is the uncommon trait of never having set foot in Jackson, or Wyoming, even. In fact, numerous companies headquartered in Jackson have no employees, make no sales, or offer no product or service. They exist on paper only.

Wyoming is one of the hotbeds in the cryptic industry of incorporation services, along with Nevada and Delaware. The business-friendly Cowboy State has aggressively marketed itself as THE place to start or move your enterprise, even if you don’t actually hang a shingle here. The virtual reality is that nearly anyone – from convicted felons to Russian oil tycoons – can set up shop anywhere in the state, including Jackson Hole, in less than one week with little paperwork and about $200.

The ease of incorporating in Wyoming has led to accusations of abuse, fraud and tax evasion. The Wyoming Secretary of State’s Office has tried to balance promotion of Wyoming’s business-conducive environment with occasional crackdowns on shell companies and other nefarious instances of “mailbox corporations.” Still, Wyoming remains a go-to state for entities looking to dodge Uncle Sam, operate under the radar, or protect their assets.

Limited liability, unlimited possibilities

What do Miele Manufacturing & Distribution (the notorious German vacuum builder also dabbling in e-cigarettes), Colette Sol USA (a women’s shoe line from the Netherlands), and Ohana (a Hawaiian coffee importer owned by Henry and Violet Sung) have in common? They are three of more than 300 companies from around the world calling Jackson Hole their headquarters. All of incorporated businesses and Limited Liability Companies (LLC) list 690 S. Highway 89, Jackson, as their home office. All stuffed into Mountain Business Center’s Suite 200, in fact.

Other locales for phantom corporations listing Jackson Hole as their headquarters include 125 S. King, 60 E. Simpson, and 270 W. Pearl Ave., Suite 103.

040115feature.kitchenMountain Business Center (MBC) is the industry leader in Jackson when it comes to incorporation services. Commercial registered agent Rebecca Bextel is a one-woman gang in more ways than one. Her name is listed on nearly every one of the hundreds of Articles of Organization in MBC’s file cabinets. On most given days (and nights) Bextel sits at a reception desk sorting through mail, scanning documents and emailing clients. Business is booming and she’s not surprised.

“I help people all over the world set up companies in America and Wyoming is the place to set a business up in America,” Bextel said. “I think people are starting to recognize Wyoming is the best place to do business in the world. It’s considered, arguably, the most business-friendly state in America. Tax benefits galore. With a Wyoming LLC ownership you can remain anonymous, or at least off the public record.”

U.S. companies incorporate in Wyoming to beat high taxes in their home state. Wyoming has no personal, corporate or capital gains taxes. Others form LLCs for the state’s nonintrusive policy – a sort of “don’t ask, don’t tell” stance – that guarantees anonymity for anyone starting a business. The owner’s name, address or contact information never appears on a public document. No officers need to be listed. Those considering Wyoming also cherish protections from lawsuits and easy access to the court system.

Jennifer Reuting, author of LLCs for Dummies, calls Wyoming a hidden jewel. “Wyoming may not be the most glamorous place in the states to domicile your corporation or LLC, however don’t underestimate it as a tax haven,” she said. “It’s a wonder that it hasn’t exploded yet, but just wait … it will happen.”

Wyoming was the first state to adopt and legalize LLCs in 1977. For decades the law sat on the books gathering dust until the new millennium. Now, even Nevada’s registered agents are jumping on the Wyoming bandwagon.

040115feature.roomMyNewCompany.com is headquartered in Las Vegas where they sign up companies online. An update appeared on the company website: “We recently opened an office in Cheyenne, Wyoming due to overwhelming demand. It has lower fees, less disclosure requirements and the Wyoming Secretary of State is a pleasure to work with (compared to Nevada’s Secretary of State which [sic] tends to be overwhelmed and unorganized).”

Jason Majors is a Jackson attorney who is also a commercial registered agent setting up business corporations, LLCs, and trusts at his 125 S. King office. He also has noticed an uptick in incorporating in Wyoming. He thinks Jackson Hole might be poised to lead the way.

“It’s been steadily increasing in my practice. I wouldn’t be surprised if the state has more companies than individuals, like cows in a sense,” Majors joked. “You used to hear of Switzerland being a go-to place for whatever the reasons may be; well, states are now vying for that business. Jackson is interesting. When I first started practicing in 2001, [incorporation service] wasn’t really on the radar. I didn’t hear a lot of buzz or people talking about going to Wyoming to set up their businesses or trusts. But I’d say by mid-2000s it started gaining traction. It seems like the more wealth that moves into town, the more it’s exploding. You see a lot of people coming from California mainly because [of its high] income tax. I can see Jackson becoming sort of a financial hub.”

Both Majors and Bextel believe Jackson Hole has particular cachet and allure for burgeoning captains of industry.

“People love Jackson,” Bextel said. “People love this area. It’s famous. I’m always surprised that even in places like Australia or Hong Kong or Paris – everyone knows about Yellowstone. Everyone knows about Grand Teton. Everyone knows about Jackson Hole. People ask me about the cowboys and buffaloes all the time. So yeah, people want to be here.”

Agile working: the officeless paradigm

MBC offers what most registered agents can’t or don’t bother with: a virtual office. Bextel’s clientele includes a waiting list of sole proprietors and entrepreneurs convinced they have an idea for the next big thing.

“One of the beautiful things about a virtual office is it helps even the little guy have a prestigious address,” Bextel said. “There is no telling how many kids, like 23-year-old people, who have meetings with their vendors or their potential clients here. Can you imagine what it would cost just to staff an office to handle mail and receive stuff and have somebody answer the phones? It’s an expensive process and you are really putting your butt on the line.

“[We provide] one central hub and we can do it a lot more affordably than if you had to pay a secretary, and sign a five-year lease, and have [the expense of] a build-out, and pay light bills and air conditioning bills. With a virtual office you can work from home and then come here to a nice office with a copier, a scanner, Internet access on Silverstar’s fiber optic line. It kind of helps the little guy – and I hate to say the little guy because a lot of our clients do have a lot of money but they don’t need a full-time office.”

Virtual offices and shared workspaces like Spark in Jackson are growing in popularity as technological innovation increases on par with the skyrocketing local commercial real estate rents – both contributing factors in the death of the cubicle. Blame a recessionary economy for corporate entities’ eagerness to trim overhead tied to traditional, high-cost office spaces. But another factor is at play: the American Dream has never been more within reach, especially for non-Americans.

“That’s what everybody wants — a job where they can work from home or any place in the world,” Bextel said. “I hear all the time about how people want to have a big business in America. These kids, such sharp, smart kids from all over the world, they hope to eventually move here one day and run a successful business. They are making an investment in this country. If you want to help America, go start a small business. I genuinely believe that.”

MBC’s client list is truly international. In addition to providing a home base for a window installer from Montana, a siding company from Utah and a goat milk soap seller from Colorado, Bextel has also signed up enterprising individuals from Hong Kong to India to a Romanian client who sells unique kitchen gadgets.

Bextel said she might be the only person in the state who can take an international client from “A to Z in forming a business in Wyoming.” The 34-year-old Alabama native endured a grueling four-month training process to become a Certified Acceptance Agent (CAA) able to handle passport verification, W-7 certification, ITIN or EIN setup – paperwork an embassy or consulate would normally need to assist foreigners with.

040115feature.leadWhat’s in it for Wyoming?

The Cowboy State continually ranks at or near the top in most business-friendly lists. CNN Money lists Wyoming as No. 1 in its list of “7 tax-free havens.” According to the Tax Foundation’s State Business Tax Climate Index, Wyoming has the most business-friendly tax system of any state for the past six years running. With an estimated 2 million new corporations and LLCs created each year in the U.S., according to Senate investigators, the Equality State is pushing hard for a piece of the pie.

A brick-and-mortar based entity operating out of state can’t take full advantage of Wyoming’s tax haven but with the explosion of e-commerce, many Web-based companies are looking to game the system by incorporating in Wyoming. Bextel quickly dismisses the notion Wyoming is a “tax haven.” She admits some individuals are looking for a tax-favorable situation but believes there is so much more behind the westward ho to incorporate. Majors, however, thinks that is a main driver behind the influx of the daily formation of new LLCs in Jackson.

“Most of it’s tax driven,” Majors admitted. “When you are looking to set up a business you ask yourself, ‘What is going to be the most tax-advantaged way for me to set it up?’ Then it’s, ‘Where is the best place for choice of law and jurisdiction?’”

Majors said Wyoming’s low fees are also an attraction. Nevada just raised its fees and legislation has recently been proposed (and shot down) to add a state income tax.

“I think we are a pretty stable state,” he said, referring to the state’s relatively robust budget health. “I don’t think we will be implementing any kind of a state income tax anytime soon.”

So if the state doesn’t collect taxes and the fees are pitifully low, what is the benefit to Wyoming? Why attract businesses by the thousands who have no vested interest or physical presence here?

“People may eventually start doing business here or have more of a presence here,” Majors said. “They’ll start hiring accountants and lawyers, and opening bank accounts. It’s really a growing industry. It eventually provides jobs.”

Bextel sees a more immediate impact.

“We get a lot out of it,” Bextel said. “Me and Ruth Ann [Petroff] down in Cheyenne are constantly telling people about business tourists. I can’t tell you how many of my customers fly in here. Last weekend, I probably had 10 people come through this building. And this is the off-season. These people set up their businesses here. They employ attorneys, CPAs, their bank accounts are here. They fly into the airport. They pay taxi drivers. They eat at restaurants and stay in hotels. They take the family to Yellowstone and float down the Snake River. They buy property or timeshares here. There is a lot of economy in Jackson just from this one little business.”

Avoiding high taxes and protecting personal assets from lawsuits are not the only reasons many find LLCs particularly attractive. Bextel pointed out scenarios where forming a company makes good sense. Wyoming LLCs live in perpetuity. Combine that with a lifetime proxy vote and a corporation can outlive partner changes or the death of its founder.

A common scenario involves multiple partners from different states getting together behind a business plan to form a company, Bextel said. Should one leave or another join, the company name can remain consistent.

Anonymity is important for some individuals. Bextel has one client in the highly competitive wind energy field. He uses LLCs to protect patents he’s registered so the competition never catches wind of his new ideas. Others are looking to make a break from their current jobs by forming their own companies.

“They don’t want their boss to know they are trying in a year to quit their job and start their own business,” Bextel said.

LLCs are also used to shield land buyers from potential sellers. Nonprofits, for instance, often get unfair treatment and a jacked up price if the seller knows who they are.

“If you can remember Rockefeller went around here anonymously and started buying up land,” Bextel said. “What if he had to be public? Things probably would not have turned out as good for all of us around here.”

Still, a few cheat the system. In particular, California residents sometimes avoid sales tax on big-ticket items like motorhomes by forming an LLC in Montana, say, where a state resident would not have to pay sales tax on that item. A Montana LLC is considered a Montana resident. Some companies specialize in setting up these temporary transactional LLCs in order to get around high state sales tax.

Shell game

Wyoming’s encouragement of corporate secrecy invites shady customers. Long before a 2011 Reuter’s story (“A little house of secrets on the Great Plains”) broke the news nationally that Wyoming provided aid and comfort to alleged arms dealers, money-launderers and other criminally-minded individuals, the Wyoming Secretary of State’s office was getting flack from the feds.

In 2006, a global anti-money-laundering group named Wyoming, Nevada, and Delaware as the most attractive states for fraudulent shell corporations to locate. By the time then-state secretary Max Maxfield took office in 2007, cleaning up Wyoming’s reputation as an outlaw state was his top priority.

Legislation enacted in 2009 was targeted at 5,700 phony or fraudulent shell companies registered to post office boxes. In all, some 7,000 fly-by-night firms were dissolved by the state by the end of the year.

It wasn’t enough.

Rumors continued circulating about shell companies being used for Ponzi schemes, tax scams and pump-and-dump stock swindles. Shell companies have vexed the federal government for decades, muddying money trails and offering endless places to stash cash from the IRS. The Economist ran a story calling Wyoming the “Switzerland of the Rocky Mountains,” followed by a study from BYU looking into the ease of establishing shell companies. It found Nevada and Wyoming were among the most likely to turn a blind eye to laws requiring identification of corporate owners.

In 2011, Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee on Investigations, and Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Judiciary Committee, introduced legislation that would help strip away some of the transparency that hinders investigations into terrorism, money-laundering, fraud and tax evasion.

“It takes more information to obtain a driver’s license than it does to form a U.S. corporation,” Levin said.

States like Wyoming that don’t require anyone be named as owner of a corporation being formed under their laws practically invite people to misuse the system, Levin said. He added that federal intervention was needed because any state trying to act on its own to clean things up will just drive “people seeking to use corporations for nefarious purposes” to switch to another state with weaker requirements.

Wyoming State Secretary Edward Murray. (Photo credit: Wyoming Secretary of State)

Wyoming State Secretary Edward Murray. (Photo credit: Wyoming Secretary of State)

Wyoming State Secretary Edward F. Murray III took office in January. He admits clamping down on fraud is always a delicate balancing act with keeping Wyoming business-friendly.

“Shortly after Secretary Maxfield took office in 2006, Wyoming was thrown in the national spotlight for the fraudulent use of shell companies and the anonymity around businesses that were formed in Wyoming,” Murray said. “This is an area that Secretary Maxfield was very aggressive on and one that I will continue to be aggressive on.”

The most prolific registered agent service in the state is Wyoming Corporate Services (WCS). The private company, owned by Gerald Pitts, handles thousands of Incs and LLCs. Before the state crackdown on bunko artists, its website advertised the following, found in a cached version of the URL before this paragraph was scrubbed:

“… [A] corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend, or a decoy. A person you control yet cannot be held accountable for its actions. Imagine the possibilities!”

A WCS competitor out of Buffalo boasts: “The State of Wyoming doesn’t want to know who the members and managers of an LLC are, but they need to be able to point to someone who does.”

That someone is Bextel and Majors. Neither was particularly worried about fraudulent uses of companies they register coming back to bite them, personally. They are not legally liable in any way and both say they use good judgment when considering new clients.

Majors said he’s turned a few people away on a hunch. “They just didn’t feel right,” he said. “If somebody was going to do something illegal I certainly wouldn’t provide any services to them.”

Bextel, too, has refused service to a few characters.

“Yes, [I’ve turned a few away],” Bextel said. “I’m waiting on some people to blow me up on Google.

“I had one guy call me up the other day. He said he was a web developer and was interested in my services. After a while he says he wants to be the signer of a bank account for some real, mega property that he doesn’t own. I said, ‘Sir, this just doesn’t feel right and I’m not even going to help you here.’ Well, he flipped out.”

Bextel reported she’s also had people call and give one name and then admit their real name was something else. “Sorry, red flag,” she said. “[MBC owner] Carl [Knobloch] and I have a personal, moral obligation to do the right thing as well as a business obligation.”

If registered agents promise to take their clients’ names to the grave, what would it take for them to disclose sensitive information?

“A subpoena,” Bextel said. “It’s happened a few times. Fewer than five times in four years, I would say. Usually they don’t ask who owns the company. They just say, ‘ABC LLC has been sued.’ Then, when the sheriff or whoever leaves, I get on the phone and say, ‘Hey, Joe, your company’s been sued. Here’s the summons. Where would you like me to send it to?’”

Shelf companies are also en vogue. They are companies formed by organizations like MBC and WCS for the sole purpose of sitting on a shelf to age. The older the company, the higher the price they fetch. Insiders say owning a company with some age on it looks good to potential investors and the Internal Revenue Service, making it appear as if the firm has been around for a while and not just opened overnight.

Bextel said she mainly uses shelf companies for partnership splits where one co-owner suddenly finds himself with a large sum of money for his share of a business. “It’s nothing shady,” she said, “they are just not about to deposit that check into their personal account.”

Virtually Jackson Hole

Jackson has its own share of interesting characters incorporated in town. Ariel Ozick parks his California Internet business in Jackson. He runs a couple of background-checking websites offering to dish the dirt on ex-cons and child molesters at ArrestRecords.com and RecordsFerret.com.

Chris Mohritz, another Californian out of La Jolla, headquarters Better Living Labs, Inc. Under its banner, Mohritz has 22 point-of-purchase URLs selling anything from sea sponges to popsicles, though none of the Web sites worked or appeared ready for use.

The Mitchell Madison Group, a “post-consulting” firm, has all of its bases covered. It can be reached at its virtual corporate offices in Switzerland, the Philippines or Jackson Hole. In reality, the only place it physically exists is Santa Monica and Manhattan.

eLogicTech Solutions, a diversified outsource IT service company, is based in Hyderabad, India, and collects its U.S. mail in Jackson, Wyoming. Rupali Modi and Nirav Modi founded the subsidiary of the Modi Group in 1999. They have more than 1,000 employees (none of them in Wyoming) and combined annual sales of $100 million across various industries including manufacturing, trading and real estate.

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About Jake Nichols

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2 Comments

  1. Patty

    April 2, 2015 at 7:22 am

    Can you create an LLC for non-business activity (buying stuff under LLC’s name or political donations, etc) and not have business-activity consequences? It seems like buying the motor home as an LLC would require all sorts of Federal Tax paperwork every quarter if an LLC is considered a business entity. And business bank accounts come with all sorts of extra fees. If I was rich enough to buy a motor home (but not really rich), I’d probably just buy it without an LLC.

  2. jake

    April 2, 2015 at 9:22 am

    @Patty… Yes you can create an LLC without actually conducting or intention to conduct ANY “business.” Some LLCs are created as a vehicle for making political donations in order to keep the donor confidential. Some LLCs are formed simply to protect a patent or copyright on a song, for example. Regarding your assertion you would just buy a motorhome without sweating the tax if you were rich: I bet you wouldn’t. For one, it’s all relative. A $200,000 diesel-pusher would run $18,000 in taxes, plus fees and registration if purchased, say, in Orange County, CA. That’s a lot of money even for the rich. Especially for the rich. Two things I have observed about the 1 percent. They are no less frugal about money than anyone else. In fact, most are more careful with their money. And two: They abhor handing their money over to Uncle Sam.

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