Sacramento, Calif.— Senator María Elena Durazo (D-Los Angeles) introduced SB 1201, the Limited Liability Corporation (LLC) Owner Transparency Act, to require the owners of businesses held in LLCs and similar corporate entities to disclose their names. This information is key to enforcing a wide range of existing laws designed to protect Californians, ranging from worker safety laws to habitability requirements in rental housing. The current lack of owner transparency is a drain on resources and hampers achieving justice for working Californians. This policy would support law-abiding business owners by ensuring bad actors are unable to hide behind layers of corporate entities to operate with impunity. It also would enable communities to understand who owns businesses and properties in their neighborhoods. 

“At a time when we are facing a large state deficit, this legislation is simply common sense and would both promote government efficiency and save taxpayer dollars,” said Senator Durazo. “It can take years for justice departments, labor representatives, and other enforcement entities to connect the dots to show that a single person is responsible for repeated violations, allowing abuses to continue largely unimpeded and draining government resources. Moreover, policymakers and the public lack critical information to design policies that are responsive to those needs.”

Current law allows for the creation of LLCs to provide legal protection for assets not owned by the LLC. However, owners abuse LLCs to shield not only their assets, but also their identities. Compounding the issue, many LLCs are owned in the name of another LLC, creating additional layers of anonymity. None of this is necessary to achieve the legal and financial protection afforded by forming an LLC. The anonymity is essentially a loophole being exploited by unscrupulous actors.

Anonymous LLCs enable serial violations in the lowest wage industries, including restaurants, nail salons, car washes, and nursing homes. Without public information about who actually owns and operates businesses in California, we lack critical tools to protect Californians from bad actors and individuals are unable to enforce their rights. 

As a former government attorney who led an investigation digging through a web of corporations to uncover the individual owners behind a local real estate empire that rented unsafe units with no heat, no hot water, major leaks, and serious fire hazards to working families, I know firsthand the inefficiencies—time and money—these opaque ownership structures cause,” said Suzie Dershowitz, Senior Staff Attorney with Public Advocates. “For far too long, bad actors have been able to abuse the LLC structure to maintain anonymity while skirting the law and harming our communities. SB 1201 is a critical measure that will allow local and state enforcement agencies to do their jobs more efficiently and hold bad actors accountable.”

The use of anonymous LLCs hides the extent to which California’s housing and commercial property stock is increasingly concentrated in the hands of large corporations. These sophisticated entities use numerous LLCs to create the impression that they are small mom and pop investors when, in fact, they own hundreds of properties. They aggressively outbid families, true small landlords, and small business owners, crowding out first-time homebuyers and limiting wealth-building opportunities in many California communities.

“Without owner transparency, we cannot assess the full extent to which our communities’ assets are actually owned by a small number of corporate entities,” said Jyotswaroop Bawa, Chief of Organizing and Campaigns at Rise Economy.  “This limits the ability of policymakers to craft solutions that are responsive to real-world conditions and that ensure low- and moderate-income families can live in stable and affordable neighborhoods and build wealth through homeownership and small business ownership.”

Learn More about SB 1201 →

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Rise Economy, formerly the California Reinvestment Coalition (CRC), is a member-led alliance focused on creating a more equitable society where Black, Indigenous and People of Color have access to resources and opportunities to build generational wealth. As the largest statewide community reinvestment alliance in the country, Rise Economy advocates for policies and practices that promote racial and economic justice and address the root causes of inequality, redlining and systemic racism. 

Public Advocates Inc. is a nonprofit law firm and advocacy organization that challenges the systemic causes of poverty and racial discrimination by strengthening community voices in public policy and achieving tangible legal victories advancing education, housing, transportation equity, and climate justice.

 

Media Contact: 

Sumeet Bal, Director of Communication, sbal@publicadvocates.org, 917.647.1952

Madison D’Ornellas, Communications Specialist, mdornellas@rise-economy.org, 562.825.6034